Enter your search text in the box above

Select a result to preview

Micro Unit 5

#topic/econ

Unit 1-4 is base on the production market, while Unit 5 is base on factor market.

Four Factors of Production

  1. Land - all natural resources that are used to produce goods and services.
  2. Labor - any efforta person devotes to a task for which that person is paid. The Four Factors of Production
  3. Capital Physical Capital - any human-made resource that is used to create other goods and services. Human Capital - any skills or knowledge gained by a worker through education and experience.
  4. Entrepreneurship - ambitious leaders that combine the other factors of production to create goods and services.

Labor Market

Similar to the product market, there were also demand and supply curve in the labor market. Individuals supply labors and firms demands labors.
Labor_Market_Equilibrium.png
The quantity of labor and wage is determined by the supply and demand curve.

Minimum Wage

To protect legitimate right of the workers, some market had set the Minimum Wage. A binding minimum wage is like a Price Floor, and will create Surplus. So workers that were hired is better off with higher wages, but how about the unemployment workers? A question the policymaker need to consider.

Firm

For a firm, it will hire as many workers until

公式

Marginal Revenue Product (MRP) = Marginal Resource Cost (MRC)
Note that it is similar to Profit Maximizing Rule, while MR=MC

Side-by-Side_Graph_Showing_Perfectly_Competitive_Labor_Market_and_Firm.png
The graph shows the relationship between perfectly competition labor market and each individual firms

Labor Market Imperfections

A Monopoly in labor market is called a Monopsony
Graph_of_a_Monopsony.png

Note

Similar to the graph of a monopoly, MRC curve is NOT EQUAL to the supply curve. Because for every additional labor a monopsony hire, it would need to increase the wages for every labor that had already being hired.