The demand for resources, mainly labor, is concentrated on in this chapter. Resource prices and their implications on money income, cost minimization, resource allocation, and policies are examined. Then the resource demand curve is derived in purely competitive and imperfectly competitive markets. The optimal combination of resources and the least cost rule and profit maximization are looked at as well. The Last Word is about how ATMs have replaced human labor in the banking industry. | Chapter 14 The Demand for Resources Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. The demand for resources, mainly labor, is concentrated on in this chapter. Resource prices and their implications on money income, cost minimization, resource allocation, and policies are examined. Then the resource demand curve is derived in purely competitive and imperfectly competitive markets. The optimal combination of resources and the least cost rule and profit maximization are looked at as well. The Last Word is about how ATMs have replaced human labor in the banking industry. Significance of Resource Pricing Determines money income for the household Cost minimization Resource allocation Policy issues LO1 Studying resource pricing aids in the understanding of economic activity in several ways. Resource prices are a major factor in determining the income of households. To firms, resource | Chapter 14 The Demand for Resources Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. The demand for resources, mainly labor, is concentrated on in this chapter. Resource prices and their implications on money income, cost minimization, resource allocation, and policies are examined. Then the resource demand curve is derived in purely competitive and imperfectly competitive markets. The optimal combination of resources and the least cost rule and profit maximization are looked at as well. The Last Word is about how ATMs have replaced human labor in the banking industry. Significance of Resource Pricing Determines money income for the household Cost minimization Resource allocation Policy issues LO1 Studying resource pricing aids in the understanding of economic activity in several ways. Resource prices are a major factor in determining the income of households. To firms, resource prices represent costs. To make the most money, firms must produce at the profit-maximizing output with the least costly combination of resources. Resource prices help in the allocation of resources among the various industries and firms that need them. And finally, many policy issues like: CEO pay, labor unions, and minimum wage increases are based on resource pricing. While the focus in this chapter is on the labor resource, the principles apply just as well to the other economic resources: land, capital, and entrepreneurial ability. Marginal Productivity Theory of Resource Demand Assume perfectly competition Product markets Resource markets Derived demand for resources depends on Marginal product of the resource (MP) Price of the product it produces (P) LO2 To keep the example simple, assume that resources are bought and sold in perfectly competitive markets and that the products produced by the resources are also bought and sold in perfectly competitive markets. Note that .
