ECO102H1 Lecture Notes - Marginal Product, Demand Curve, Perfect Competition

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14 Apr 2014
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ECO102H1 Full Course Notes
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ECO102H1 Full Course Notes
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Friday jan 11: 11:00am to noon, ge351. Markets for factors of production: the factors of production. Demand for factor of production is a derived demand. Firms use the factor to produce goods and services. Dd and ss determine wage rate (price of labour) Further, we can demonstrate that wage rate = value of marginal product. Vmp = price (of good produced) times marginal product. 2) marginal product of labour (which falls if law of diminishing return applies) 2) labour is only variable factor of production (so law of diminishing. 1) mp declines as number of workers increases (and thus) 2) vmp declines as number of workers increases. How many workers will the firm hire? (the purpose of the chart) Insight: firm will not hire a worker unless vmp is at least equal to the wage rate. Example: if wage rate is , firm will not hire the 3rd worker (since vmp of 3rd worker is )

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