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Chapter 18

Economics 1021 Chapter 18 Notes

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Economics 1021A/B
Jeannie Gillmore

Chapter 18 The Anatomy of Factor Markets  The four factors of production are: o Labour o Capital o Land (natural resources) o Entrepreneurship  Markets for Labour services: o Labour services: Physical and mental work effort that people supply to produce goods and services o Labour market: A collection of people and firms who trade labour services o Job: Labour services that are traded on a contract. o Casual labour: Labour services that are traded day – by – day o Wage is determined by supply and demand. o In some markets, a union organizes labour, which introduces monopoly on the supply of the market.  Markets for capital services: o Capital: tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services o Rental services: A market for capital services o Rental rate: The price in a capital services market  Markets for land services and natural resources: o Land: Natural resources, and the property itself o Price (commodity price) is determined by the global commodity markets  Entrepreneurship: Not traded in the markets. Demand for a Factor of Production (Labour)  Derived demand: The demand for a factor of production o Firms hire the quantities of factors of production that maximizes profit. o To achieve this, they hire an additional unit of a factor of productio
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