ECO100Y1 Lecture Notes - Tiger Woods, Marginal Product, Marginal Revenue

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Markets for factors of production: the factors of production, derived demand for labour: an example. 2. 3 demand for labour = mrp of labour: interdependence of product and factor markets, workers are paid their mrp. Labour what we"re focusing on this year. Demand for factor is a derived demand linked to the market it is used to produce. Firms use the factor to produce goods and service. Wage rate = value of marginal product (our focus) Value of marginal product (vmp) is the price of the good produced times marginal product (mp) Result: vmp depends upon: price of product produced, mp of labour (which falls if law of diminishing returns applies) Assumption: firms are perfectly competitive, labour is only variable factor of production (so law of diminishing returns applies, price of widget: 5. Total product (tp) marginal product (mp) or (change in. Observations: mp declines as number of workers increases (and thus, vmp declines as number of workers increases.

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