Download Unit 5: Factors Market

Unit 5: Factors Market: Scarce Resources that are used to
produce goods
10-18% of AP Test
Factors Market: Land Labour, Capital and Entrepreneurship
How the cost of the factors affect production decisions?
20.
Labour
How changes in the factors market affect production costs,
output and profits? How changes in the industry also affect the
firms need for the factor?
Mankiw Chapters 18-19
1. Marginal Physical Product related to
firms need for the factor.
2. Marginal Revenue Product and derived
demand
3. Hiring decision for a purely competitive
Firm based on MFC=MRP
4. Firm’s Supply curve and its elasticity
5. Firms demand curve for industry and
demand curve for firm
6. Impact of Minimum Wage Laws
7. Monopsony vs. purely competitive
labor market
Review Book
Chapter 10
21.
Rent, Interest, and Profits
Return to concept of scarce resources and
how we pay for them.
Land=rent
Labor=wages
Capital=interest
Entrepreneurship= profit
Again difference between economic profit and
accounting profit
Ratio of efficient use of factors vs. the output firm
receives and price paid for the resource
Review Book
Graphs you need to be able to:
1. Draw, label and explain by using side-by-side
graphs of the factor industry and the
firm under conditions that are purely
competitive.
2. Locate the equilibrium wage and quantity hired
if purely competitive.
3. Locate the supply and demand curves
for an individual firm operating in
a purely competitive factors market.
4. Draw, label and explain how of changes
in the product market impact the factors
graphs.
5. Draw, label and explain the monopsony curves.
AP exercises:
# 50:
# 51:
# 53:
# 55:
# 56:
Derived Demand
How many workers should be hired
Factor Market Pricing
Competitive Factor Market
Monopsonistic Labor Markets
AP Essays:
1991: Impact of minimum wage
1994: Impact of new workers in wage and hiring decisions for
the industry and firm operating in a purely competitive
market structure
1994: Explain relationship between MRP, MPP, and MFC.
1995: Impact of price changes in the product market on MRP,
derived demand, wage rate and quantity of workers
hired in a purely competitive industry.
22.
Test on factors