Chapter 17 - Labour and capital market. After studying this chapter, you will able to Explain how firms choose the quantities of labor, capital, and natural resources to employ; explain how people choose the quantities of labor, capital, and natural resources to supply; explain how wages, interest, and natural resource prices are determined in competitive resource markets; explain the concept of economic rent and distinguish between economic rent and opportunity cost. | Labour and Capital Market Objectives After studying this chapter, you will able to Explain how firms choose the quantities of labor, capital, and natural resources to employ Explain how people choose the quantities of labor, capital, and natural resources to supply Explain how wages, interest, and natural resource prices are determined in competitive resource markets Explain the concept of economic rent and distinguish between economic rent and opportunity cost Many Happy Returns Some people make very happy returns, like Katie Couric’s $16 million a year. Why aren’t all jobs well paid? What determines wage rates? What determines the returns to other factors of production? Before you jump into the content of this chapter, provide your students with some context and perspective. 1. Go back to Chapter 1 and the big questions of microeconomics. Point out that the course so far has addressed the first two big questions, “What?” and “How?,” and that you’re now going to . | Labour and Capital Market Objectives After studying this chapter, you will able to Explain how firms choose the quantities of labor, capital, and natural resources to employ Explain how people choose the quantities of labor, capital, and natural resources to supply Explain how wages, interest, and natural resource prices are determined in competitive resource markets Explain the concept of economic rent and distinguish between economic rent and opportunity cost Many Happy Returns Some people make very happy returns, like Katie Couric’s $16 million a year. Why aren’t all jobs well paid? What determines wage rates? What determines the returns to other factors of production? Before you jump into the content of this chapter, provide your students with some context and perspective. 1. Go back to Chapter 1 and the big questions of microeconomics. Point out that the course so far has addressed the first two big questions, “What?” and “How?,” and that you’re now going to answer the third big question, “For whom?” Put up the basic circular flows in a market economy. Use Figure (page 45) for this purpose. [To unhide this slide, click Slide Show, Hide Slide.] 2. Spend a minute or two reviewing the course so far. Point out that Chapters 3–6, demand and supply and its extensions and applications, studied the flows on the left. Chapters 7 and 8 studied the top diamond, the choices of households. Chapters 9–13 studied the bottom diamond, choices of firms. Now, we’re going to study the flows on the right, the choices of households and firms that generate those flows, and the factor market equilibrium that coordinates those choices. 3. Explain that we can cover all this material in just two chapters (the current one and Chapter 15) because we’re able to draw on what the students already know. Understanding of choices at the margin, demand and supply, and market forces that bring equilibrium and coordinate activity are all used in this chapter. Emphasize the .
