The Principles of Economics
18. The Markets for the Factors of Production
-factors of production: the inputs used to produce goods and services.
18-1 The Demands for Labor
18-1a The Competitive Profit-Maximizing Firm
-In this firm two assumptions are made: competition exists in both the product and input markets, and the firm is a profit maximizer.
18-1b The Production Function and the Marginal Product of Labor
-production function: the relationship between the quantity of inputs used to make a good and the quantity of output of that good.
-marginal product of labor: the increase in the amount of output from an additional unit of labor.
-diminishing marginal product: the property whereby the marginal product of an input declines as the quantity of the input increases.
18-1c The Value of the Marginal Product and the Demand for Labor
-value of the marginal product: the marginal product of an input times the price of the output.
-A competitive firm hires workers until the marginal product of labor's value is equal to the wage.
18-1d What Causes the Labor-Demand Curve to Shift?
-The output price and technological change causes the labor-demand curve to shift.
-Technological change doesn't benefit all workers.
-The amount of output a typical U.S. worker produced between 1960 and 2015 increased by 195%.
18-2 The Supply of Labor
18-2a The Trade-Off between Work and Leisure
-The income effect and substitution effect are conflicting effects on someone's labor-supply decision.
-The trade-off can cause a backward bending supply curve of labor.
-An income effect is an effect during the change in wage where the higher wage increases income and the demand for leisure.
-A substitution effect is when the higher wage increase the cost of leisure but reduces the demand for it.
18-2b What Causes the Labor-Supply Curve to Shift?
-Changes in tastes and alternative opportunities, and immigration cause the labor-supply curve to shit.
-The women's participation in the labor force increases as a change in tastes.
18-3 Equilibrium in the Labor Market
18-3a Shifts in Labor Supply
-95% of U.S. citizens would annually benefit from a higher number of highly educated foreigners working legally after immigrating to the U.S.
-An increase in immigration increases the supply of physicians, while the demand for apples and apple pickers also increases.
18-3b Shifts in Labor Demand
-Productivity by output per hour grew by 2.1% each year from 1959 to 2012.
-Productivity is key in acquiring a higher standard of living.
-Physical capital. human capital, and technological knowledge are key in determining levels of productivity.
18-4 The Other Factors of Production: Land and Capital
-capital: the equipment and structures used to produce goods and services.
18-4a Equilibrium in the Markets for Land and Capital
-When someone pays to use a factor for a limited period of time, they're paying a rental price.
-"Labor, land, and capital each earn the value of its marginal contribution to the production process."
18-4b Linkages among the Factors of Production
-When an event changes the supply of any factor of production, the earnings of all the factors can be altered.
18-5 Conclusion
-The theory of the neoclassical theory of distribution explains how labor, land, and capital are compensated for the roles they play in the production process.
18. The Markets for the Factors of Production
-factors of production: the inputs used to produce goods and services.
18-1 The Demands for Labor
18-1a The Competitive Profit-Maximizing Firm
-In this firm two assumptions are made: competition exists in both the product and input markets, and the firm is a profit maximizer.
18-1b The Production Function and the Marginal Product of Labor
-production function: the relationship between the quantity of inputs used to make a good and the quantity of output of that good.
-marginal product of labor: the increase in the amount of output from an additional unit of labor.
-diminishing marginal product: the property whereby the marginal product of an input declines as the quantity of the input increases.
18-1c The Value of the Marginal Product and the Demand for Labor
-value of the marginal product: the marginal product of an input times the price of the output.
-A competitive firm hires workers until the marginal product of labor's value is equal to the wage.
18-1d What Causes the Labor-Demand Curve to Shift?
-The output price and technological change causes the labor-demand curve to shift.
-Technological change doesn't benefit all workers.
-The amount of output a typical U.S. worker produced between 1960 and 2015 increased by 195%.
18-2 The Supply of Labor
18-2a The Trade-Off between Work and Leisure
-The income effect and substitution effect are conflicting effects on someone's labor-supply decision.
-The trade-off can cause a backward bending supply curve of labor.
-An income effect is an effect during the change in wage where the higher wage increases income and the demand for leisure.
-A substitution effect is when the higher wage increase the cost of leisure but reduces the demand for it.
18-2b What Causes the Labor-Supply Curve to Shift?
-Changes in tastes and alternative opportunities, and immigration cause the labor-supply curve to shit.
-The women's participation in the labor force increases as a change in tastes.
18-3 Equilibrium in the Labor Market
18-3a Shifts in Labor Supply
-95% of U.S. citizens would annually benefit from a higher number of highly educated foreigners working legally after immigrating to the U.S.
-An increase in immigration increases the supply of physicians, while the demand for apples and apple pickers also increases.
18-3b Shifts in Labor Demand
-Productivity by output per hour grew by 2.1% each year from 1959 to 2012.
-Productivity is key in acquiring a higher standard of living.
-Physical capital. human capital, and technological knowledge are key in determining levels of productivity.
18-4 The Other Factors of Production: Land and Capital
-capital: the equipment and structures used to produce goods and services.
18-4a Equilibrium in the Markets for Land and Capital
-When someone pays to use a factor for a limited period of time, they're paying a rental price.
-"Labor, land, and capital each earn the value of its marginal contribution to the production process."
18-4b Linkages among the Factors of Production
-When an event changes the supply of any factor of production, the earnings of all the factors can be altered.
18-5 Conclusion
-The theory of the neoclassical theory of distribution explains how labor, land, and capital are compensated for the roles they play in the production process.