EC120 Lecture Notes - Lecture 18: Baby Boomers, Opportunity Cost, Farmer Jack
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EC120 Full Course Notes
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Ec120 chapter 18: the markets for the factors of production. Factors of production: the inputs used to produce goods and services. Capital: the equipment and structures used to produce goods and services. Prices and quantities of these inputs are determined by supply and demand in factor markets. Markets for the factors of production are like markets for goods and services, except: Demand for a factor of production is a derived demand: derived from a firm"s decision to supply a good in another market. Two assumptions: we assume all markets are competitive. In the market for the product it produces. In the labour market: we assume that firms care only about maximizing profits. Each firm"s supply of output and demand for inputs are derived from this goal. Farmer jack sells wheat in a perfectly competitive market. He hires workers in a perfectly competitive market. When deciding how many workers to hire, farmer jack maximizes profits by thing at the margin:
