EC120 Chapter 18: ch18 - Markets for the factors of production
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Chapter 18 markets for the factors of production. Most important factor is labour workers receive most of the total income earned in canadian economy. The demand for labour labour markets governed by forces of supply and demand understand labour demand -> look at firms that hire labour and use it to produce goods for sale. The production function and marginal product of labour to make hiring decision: consider how the sizes of workforce affects amount of output produced. Production function: relationship between the quantity of inputs used to make a good and quantity of output of that good. Marginal product of labour: the increase in the amount of output from an additional unit of labour: as number of workers increases, marginal product of labour declines diminishing marginal product. Diminishing marginal product: property whereby the marginal product of an input declines as the quantity of the input increases - production function curve becomes flatter as number of workers rise.