Chapter 18 introduced the topic of the markets for the factors of production. The chapter discusses this in terms of a perfectly competitive market. This chapter was relatively easy to understand, because the book uses nice examples to back up the ideas and concepts .The chapter discusses a lot from what we learned from previous chapters too, so that was helpful. I rate this difficulty a 1.5/3
The book begins talking about the three major important factors of production. Factors of production, that was slightly touched upon in Chapter 2, are the inputs used to produce goods and services. The three most important are labor, land and capital. The chapter mostly analyzes factor demand by considering how a competitive, profit-maximizing firm decides how much of any factor to buy. For instance, in order to understand the importance of the graphs of a competitive firm when deciding how much labor to hire, we need to understand production function, marginal product of labor, and the diminishing marginal product.
Something I found interesting is production function. Production functionChapter 18 introduced the topic of the markets for the factors of production. The chapter discusses this in terms of a perfectly competitive market. This chapter was relatively easy to understand, because the book uses nice examples to back up the ideas and concepts .The chapter discusses a lot from what we learned from previous chapters too, so that was helpful. I rate this difficulty a 1.5/3 is used to describe the relationship between the quantity of the inputs used in production and the quantity of output from production. Marginal product of labor is the increase in the amount of output from an additional unit of labor. Lastly, diminishing marginal product is the property whereby the marginal product of an input declines as the quantity of the input decreases.
We have learned all of these terms from previous chapters, and the book backs these terms up with a nice detailed chart to help you understand. Newly introduced is the value of the marginal product. This is the marginal product of an input times the price of the output. This can also be known as the marginal revenue product. Using these terms, we can efficiently discover how many workers a perfectly competitive firm would hire. The labor-demand curve is the value of the marginal product, and where the market wage and the labor-demand curve is the profit-maximizing quantity of labor needed.
