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Derived Demand
Demand for a resource because of the products it helps produce
Marginal Revenue Product (MRP)
Revenue that another unit of capital or labor prodces
Two Ways to find MRP
Marginal Product (MP) * Price
or change in total revenue (TR)
Marginal Factor Cost (MFC) or Marginal Resource Cost (MRC)
cost of another unit or capital or labor
Two ways to find MFC/MRC
In perf. comp. - MFC = Wage or change in total wages In imperfect competition - MFC equals the additional cost of hiring one more unit of labor or capital, which may vary with each additional unit.
Profit maximizing amount of labor
MRP=MFC
Two ways to increase MRP
Increase Marginal Product or Increase Price
Elasticity of Resource Demand
% change in resource quantity divided by % change in resource price
Labor and Captal — Complementary, substitute, both, or neither?
Can be Complementary or substitute
Least cost combination of resources
MP labor / P labor = MP capital / P capital
Profit Maximizing rule for labor and capital
MRP labor / P labor = MRP capital / P capital = 1
Note 
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