Competitive Factor Markets Demand for a Factor Input when Only one Input Is variable e Problem ◆ How much labor to hire Chapter 14 Slide 6
Chapter 14 Slide 6 Competitive Factor Markets ⚫ Problem ◆How much labor to hire Demand for a Factor Input When Only One Input Is Variable
Competitive Factor Markets Demand for a Factor Input when Only one Input Is variable Measuring the value of a Workers Output o Marginal revenue Product of labor (MRPL ●MRPL=(MP(MR) Chapter 14 Slide 7
Chapter 14 Slide 7 Competitive Factor Markets ◼ Measuring the Value of a Worker’s Output ⚫ Marginal Revenue Product of Labor (MRPL ) ⚫ MRPL = (MPL )(MR) Demand for a Factor Input When Only One Input Is Variable
Competitive Factor Markets Demand for a Factor Input when Only one Input Is variable Assume perfect competition in the product market o Then Mr= P Chapter 14 Slide 8
Chapter 14 Slide 8 Competitive Factor Markets ◼ Assume perfect competition in the product market ⚫ Then MR = P Demand for a Factor Input When Only One Input Is Variable
Competitive Factor Markets Demand for a Factor Input when Only one Input Is variable ■ Question o What will happen to the value of MRPL when more workers are hired? Chapter 14 Slide 9
Chapter 14 Slide 9 Competitive Factor Markets ◼ Question ⚫ What will happen to the value of MRPL when more workers are hired? Demand for a Factor Input When Only One Input Is Variable
Marginal Revenue Product Wages (S per hour) Competitive Output Market (P=MR) MRPIE MPIXP Monopolistic Output Market MRPIE MPI X MR (P≤MR) Hours of work Chapter 14 Slide 10
Chapter 14 Slide 10 Marginal Revenue Product Hours of Work Wages ($ per hour) MRPL = MPLxP Competitive Output Market (P = MR) MRPL = MPL x MR Monopolistic Output Market (P < MR)