ECON 1B03 Lecture Notes - Human Capital, Marginal Revenue, Economic Equilibrium
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ECON 1B03 Full Course Notes
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Perfectly competitive (buyers and sellers are price takers). Profit from a worker: revenue minus the worker"s wage. A worker"s contribution: their marginal product times the selling price of the good, p, this is the value of marginal product of labour, vmpl. Firms choose the quantity of labour corresponding to where wage = vmpl. Shift factors for labour demand: changes in price of goods. If p increases, d increases and curve shifts right. If p decreases, d decreases and curve shifts left: changes in supply of other factors, technological change, advances that increase the mp of labour shift the curve to the right. The opportunity cost of leisure is an hour"s wage. Shift factors for labour supply: change in attitudes, changes in alternative opportunities. Equilibrium price happens when labour demand = labour supply. Rental price is what a person pays to use a factor of production for a limited period of time. r = rental price of capital.