ECON-221 Lecture Notes - Lecture 13: Marginal Revenue Productivity Theory Of Wages, Market Impact, Capital Good
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24 Aug 2020
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The demand for outputs: if product demand increases, product price will rise and the marginal revenue product (factor demand) will increase the mrp curve will shift to the right. If product demand declines, product price will fall and marginal revenue product (factor demand) will decrease - the mrp curve will shift to the left. Mrp impacts market demand: technological change can and does have a powerful influence on factor demands. As new products and new techniques of production are born, so are demands for new inputs and new skills. As old products become more obsolete, so, too, do the labor skills and other inputs new to produce them: effect on wages depends on how many firms adopt new technology see previous slide. Marginal productivity theory of income distribution: at equilibrium, all factors of production end up receiving rewards determined by their productivity as measured by marginal revenue product. Input demand: the capital market and the investment decision.
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