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SCARCE RESOURCE: A resource with an available quantity less than its desired use. Scarce resources are also called factors of production. Scarce goods are also termed economic goods. Scarce resources are used to produce scarce goods. Like the more general society-wide condition of scarcity, a given resource is scarce because it has a limited availability in combination with a greater (potentially unlimited) productive use. It's both of these that make it scarce. In other words, even though an item is quite limited it will not be a scarce resource if it has few if any uses (think pocket lint and free good).

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Lesson 23: Factor Market Equilibrium | Unit 3: Perfect Competition Page: 14 of 24

Topic: Efficiency <=PAGE BACK | PAGE NEXT=>

  • The primary condition for profit-maximization AND efficiency derived from the analysis of labor employment is:

  • MRP = MFC = W
  • This conditions states that a profit-maximizing firm hires labor services up to the quantity that equates marginal revenue product (MRP) and marginal factor cost (MFC).

  • Efficiency results because the marginal revenue product (MRP) is equal to the wage (W).


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ABSTRACTION

Simplifying the complexities of the real world by ignoring (hopefully) unimportant details while doing economic analysis. Abstraction is an essential feature of the scientific method. Hypothesis verification, model construction, and comparative static analysis are not possible without abstraction.

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APLS

BEIGE MUNDORTLE
[What's This?]

Today, you are likely to spend a great deal of time browsing through a long list of dot com websites wanting to buy either a how-to book on home repairs or a large, stuffed kitty cat. Be on the lookout for broken fingernail clippers.
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On a typical day, the United States Mint produces over $1 million worth of dimes.
"Recipe for success. Study while others are sleeping; work while others are loafing, prepare while others are playing, and dream while others are wishing."

-- William A. Ward

DARA
Decreasing Absolute Risk Aversion
A PEDestrian's Guide
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