Lecture 22-Markets for Factors of Production
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Thursday, January 7th, 2010.
Markets for Factors of Productions
Full-Time Earnings (Year 2007 Dollars)
Physicians (GPs): $140,832
Registered Nurses: $ 53,354
High School Teachers: $ 57,480
Actors: $ 41,694
Cooks: $ 24,353
1. What is economics explanation?
(Answer: Value of Marginal Product)
2. How good is economics explanation?
(Answer: Pretty Good)
Factors of Production
x Capital (equipment, structures)
1. Demand for factor is a derived demand
2. Price of factor is determined by demand and supply
FIRM PRODUCES WIDGETS (Perfect Competition)
1. Labour is variable factor (principle of diminishing marginal product applies)
2. Price of widget: $5
3. Wage rate: $150 per day
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