Chapter 12 - The demand for resources. In this chapter, students will be able to understand: Explain the significance of resource pricing, convey how the marginal revenue productivity of a resource relates to a firm's demand for that resource, list the factors that increase or decrease resource demand, discuss the determinants of elasticity of resource demand, determine how a competitive firm selects its optimal combination of resources. | The Demand For Resources Chapter 12 Chapter Objectives Resource pricing Marginal revenue productivity and firm resource demand Factors that affect resource demand Elasticity of resource demand Optimal combination of resources for the competitive firm 12- Resource Pricing Firms demand resources Focus on labor Resource prices are important Money-income determination Cost minimization Resource allocation Policy issues 12- Resource Demand All markets are competitive (good and resource) Derived demand depends on: Productivity of resource (MP) Price of good it helps produce (P) Marginal revenue product (MRP) Change in TR resulting from unit change in resource (labor) 12- Rule for employing resources: MRP = MRC Marginal Revenue Product = Change in Total Revenue Unit Change in Resource Quantity Marginal Resource Cost = Change in Total (Resource) Cost Unit Change in Resource Quantity Marginal Revenue Product (MRP) Marginal Resource Cost (MRC) Resource Demand 12- MRP as Resource Demand (1) Units of Resource (2) Total Product (Output) (3) Marginal Product (MP) (4) Product Price (5) Total Revenue, (2) X (4) (6) Marginal Revenue Product (MRP) 0 1 2 3 4 5 6 7 0 7 13 18 22 25 27 28 7 6 5 4 3 2 1 $2 2 2 2 2 2 2 2 $ 0 14 26 36 44 50 54 56 $14 12 10 8 6 4 2 ] ] ] ] ] ] ] ] ] ] ] ] ] ] 1 2 3 4 5 6 7 0 -2 2 4 6 8 10 12 14 16 $18 Resource Wage (Wage Rate) Quantity of Resource Demanded D=MRP Purely Competitive Firm’s Demand for A Resource 12- (1) Units of Resource (2) Total Product (Output) (3) Marginal Product (MP) (4) Product Price (5) Total Revenue, (2) X (4) (6) Marginal Revenue Product (MRP) 0 1 2 3 4 5 6 7 0 7 13 18 22 25 27 28 7 6 5 4 3 2 1 $ $ $ ] ] ] ] ] ] ] ] ] ] ] ] ] ] 1 2 3 4 5 6 7 0 -2 2 4 6 8 10 12 14 16 $18 Resource Wage (Wage Rate) Quantity of Resource Demanded D=MRP (Pure Competition) Imperfectly Competitive Firm’s Demand for A | The Demand For Resources Chapter 12 Chapter Objectives Resource pricing Marginal revenue productivity and firm resource demand Factors that affect resource demand Elasticity of resource demand Optimal combination of resources for the competitive firm 12- Resource Pricing Firms demand resources Focus on labor Resource prices are important Money-income determination Cost minimization Resource allocation Policy issues 12- Resource Demand All markets are competitive (good and resource) Derived demand depends on: Productivity of resource (MP) Price of good it helps produce (P) Marginal revenue product (MRP) Change in TR resulting from unit change in resource (labor) 12- Rule for employing resources: MRP = MRC Marginal Revenue Product = Change in Total Revenue Unit Change in Resource Quantity Marginal Resource Cost = Change in Total (Resource) Cost Unit Change in Resource Quantity Marginal Revenue Product (MRP) Marginal Resource Cost (MRC) Resource Demand 12- MRP as Resource
