Unit 5 - Factor Markets Guide
3.3(4)
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16 Terms
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Factor markets
is a resource for companies to buy what the need to produce their goods and services.
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Monopsonies
pay a lower wage and hire less than perfect competition.
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Equilibrium wage
in the market: establishes the wage that firms will pay workers.
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Least cost rule
marginal product of labor /price of labor= marginal product of capital /price of capital (MPL /PL= MPK /PK)
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Factor markets
is a resource for companies to buy what the need to produce their goods and services
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Derived demand
the demand from a resource is derived by product demand
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Marginal revenue product (MRP)
the additional revenue that is generated by an additional resource/worker
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Marginal factor cost (MFC)
the additional cost of an additional resource/worker
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Least cost rule
marginal product of labor/price of labor = marginal product of capital/price of capital (MPL/PL=MPK/PK)
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Market curve
standard supply and demand curve
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Equilibrium wage in the market
establishes the wage that firms will pay workers
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Determinants of Labor Demands (DL)
1\. Productivity of the Resource
2\. Price of Other resources
3\. Product demand
2\. Price of Other resources
3\. Product demand
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Determinants of Labor Supply (SL)
1\. Personal values
2\. Intervention by Government
3\. Number of Qualified workers
2\. Intervention by Government
3\. Number of Qualified workers
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Why are the determinants of Supply and Demand Important
These factors determine the supply and demand of these quantities
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Monopsonistic Markets
Many sellers, one buyer
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Example of Imperfect Competition
Monopsonies which pay a lower wage and hire less than perfect competition
