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REAL PRODUCTION: The market value of all production measured in constant prices, after adjusting for inflation. Real production is typically measured with real GDP.
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Lesson 23: Factor Market Equilibrium | Unit 3: Perfect Competition
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Page: 13 of 24
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- This diagram sets the stage for analyzing the labor employment decision by a given firm, assuming perfect competition holds.
- The critical question facing the firm is: How many workers should it hire?
- The profit-maximizing decision by the firm is to hire 50 workers at the $10 wage.
- Should the firm hire more workers, profit declines.
- Should the firm hire fewer workers, profit declines.
- The critical conclusion from this analysis is that a firm in a perfect competition factor market employs a factor such that marginal revenue product (MRP) is equal to marginal factor cost (MFC).
- However, because this marginal factor cost (MFC) is equal to the factor price (W) for perfection competition, we have the secondary result that:
- MRP = W
- This is THE condition for efficiency in a factor market.
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ELASTICITY DETERMINANTS Three factors that affect the numerical value of the price elasticity of demand and the price elasticity of supply--availability of substitutes, time period of analysis, and proportion of budget. The price elasticities of demand and/or supply for a good can change if these determinants change. The first two determinants are important to both price elasticity of demand and price elasticity of supply, while the third relates specifically to the price elasticity of demand.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store seeking to buy either a printer that works with your stockpile of ink cartridges or income tax software. Be on the lookout for jovial bank tellers.
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General Electric is the only stock from the original 1896 Dow Jones Industrial Average remaining in the current index.
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"I much prefer the sharpest criticism of a single intelligent man to the thoughtless approval of the masses." -- Johannes Kepler, German Astronomer
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FED
Federal Reserve
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