Demand for Inputs: A Derived demand The demand for a factor of production is a Derived demana(引致需求 ◆ Derived demand(引致需求) is a demand for inputs that is dependent on the demand for the outputs those inputs can be used to produce Inputs are demanded by a firm if, and only if, households demand the good or serice produced by that firm 11
11 Demand for Inputs: A Derived Demand The demand for a factor of production is a Derived Demand(引致需求). Derived demand(引致需求) is a demand for inputs that is dependent on the demand for the outputs those inputs can be used to produce. Inputs are demanded by a firm if, and only if, households demand the good or service produced by that firm
Example: A Firm's Demand For Labour (Apple pickers) The Market for Apples The Market for apple pickers Price of Wage of Apples Apple Demand Supply Pickers Supply Firms households Demand 0 q quantity of 0 Quantity of Apples Apple Pickers
12 Example: A Firm’s Demand For Labour (Apple Pickers) The Market for Apples The Market for Apple Pickers Quantity of Apples 0 Price of Apples P Q Demand Supply Demand Supply Quantity of Apple Pickers 0 Wage of Apple Pickers L W households Firms
Chapter 10 includes: 10. 1 Introduction to Factor market 10.2 The market demand for the factors of Production 10.3 Labor Market Equilibrium 10. 4 Other Factors of production -Land and Capital 10. 5 Monopoly and monopsony power in the labour market
13 Chapter 10 includes: 10.1 Introduction to Factor Market 10.2 The Market Demand for the Factors of Production 10.3 Labor Market Equilibrium 10.4 Other Factors of Production - Land and Capital 10.5 Monopoly and monopsony power in the labour market
The Competitive Profit-Maximizing Firm Three basic assumptions about the firm are A It is competitive in both the product market and the input market A It is a price taker, for both the product it sells(e. g apples and the input it buys (e.g. apple pickers A Its goal is to maximize profits o The firm s supply of apples and its demand for workers are derived from its primary goal of maximizing profits. 14
14 The Competitive Profit-Maximizing Firm Three basic assumptions about the firm are: Ê It is competitive in both the product market and the input market. Ê It is a price taker, for both the product it sells (e.g. apples) and the input it buys (e.g. apple pickers) Ê Its goal is to maximize profits. The firm’s supply of apples and its demand for workers are derived from its primary goal of maximizing profits
How many workers to hire? To maximize profits, the firm considers how much profit each worker would bring in 丌(Q)=7R(Q)-T(Q) F.0.C MR(Q)=MC(O) 'Q=(L MR IO(L=MC IO(L)I MR(L=MC(L)
15 How many workers to hire? To maximize profits, the firm considers how much profit each worker would bring in. . . ( ) ( ) [ ( )] [ ( )] ( ) ( ) ( ) . . ( ) ( ) ( ) MR L MC L MR Q L MC Q L Q Q L MR Q MC Q F O C Q TR Q TC Q ∴ = ∴ = = = = − Q π