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This document explains the Marginal Productivity Theory of resource demand, covering the calculation of marginal revenue product and the demand for resources by both competitive and imperfectly competitive sellers. It details how employers as price setters in the product market interact with resource markets, emphasizing labor's role amidst constant input. The analysis includes practical examples and calculations demonstrating price, quantity, and total revenue changes, offering insights into the relationship between labor input and resource price dynamics.
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IV. UNIT IV A. PRODUCTION AND THE DEMAND FOR RESOURCES 1. Marginal productivity theory of resource demand a. Calculation of marginal revenue product b. Derivation of purely competitive seller's demand for a resource and the market demand for the resource c. The resource demand for an imperfectly competitive seller 2. Marg. Productivity Theory/Inc. Dist.
Employer is only seller in product market (Price greater than MR) Employer is a pure competitor in resource market (MRC = Price of Resource Services) All other inputs constant but labor
PRODUCT DEMAND PRICE QUANTITY TR CHANGE Q CHANGE TR MR $29.00 0 0 28.50 285 28.50 10 10 285 13.72 7.00 439 32 22 154 11.15 535 6.00 48 16 96 11 590 59 5.00 10.00 55 610 5 20 64 9.53 4.00 UNITS OF LABOR D FOR LABOR TP MPP MRP PER DAY PER DAY 0 0 PRICE Q 1 10 $285 2 32 154 3 48 96 4 59 55 5 64 20
PRODUCT DEMAND PRICE QUANTITY TR CHANGE Q CHANGE TR MR $29.00 0 0 28.50 285 28.50 10 10 285 13.72 7.00 439 32 22 154 11.15 535 6.00 48 16 96 11 590 59 5.00 10.00 55 610 5 20 64 9.53 4.00 Employer is only seller in product market (Price greater than MR) Employer is a pure competitor in resource market (MRC = Price of Resource Services) All other inputs constant but labor
PRODUCT DEMAND PRICE QUANTITY TR CHANGE Q CHANGE TR MR $29.00 0 0 28.50 285 28.50 10 10 285 13.72 7.00 439 32 22 154 11.15 535 6.00 48 16 96 11 590 59 5.00 10.00 55 610 5 20 64 9.53 4.00 UNITS OF LABOR D FOR LABOR TP MPP MRP PER DAY PER DAY 0 0 PRICE Q 1 10 $285 2 32 154 3 48 96 4 59 55 5 64 20
Employer is only seller in product market (Price greater than MR) Employer is a pure competitor in resource market (MRC = Price of Resource Services) All other inputs constant but labor UNITS OF LABOR D FOR LABOR TP MPP MRP PER DAY PER DAY 0 0 PRICE Q $285 1 10 154 2 32 96 3 48 55 4 59 20 5 64
PRODUCT DEMAND PRICE QUANTITY TR CHANGE Q CHANGE TR MR $29.00 0 0 28.50 285 28.50 10 10 285 13.72 7.00 439 32 22 154 11.15 535 6.00 48 16 96 11 590 59 5.00 10.00 55 610 5 20 64 9.53 4.00 UNITS OF LABOR D FOR LABOR TP MPP MRP PER DAY PER DAY 0 0 PRICE Q 1 10 $285 2 32 154 3 48 96 4 59 55 5 64 20
PRODUCT DEMAND PRICE QUANTITY TR CHANGE Q CHANGE TR MR $29.00 0 0 28.50 285 28.50 10 10 285 13.72 7.00 439 32 22 154 11.15 535 6.00 48 16 96 11 590 59 5.00 10.00 55 610 5 20 64 9.53 4.00 UNITS OF LABOR D FOR LABOR TP MPP MRP PER DAY PER DAY 0 0 PRICE Q 285 10 1 1 10 $285 2 22 154 2 32 154 3 16 96 96 3 48 4 55 11 4 59 55 20 5 5 5 20 64
PRODUCT DEMAND PRICE QUANTITY TR CHANGE Q CHANGE TR MR $29.00 0 0 28.50 285 28.50 10 10 285 13.72 7.00 439 32 22 154 11.15 535 6.00 48 16 96 11 590 59 5.00 10.00 55 610 5 20 64 9.53 4.00 UNITS OF LABOR D FOR LABOR TP MPP MRP PER DAY PER DAY 0 0 PRICE Q 285 10 1 1 10 $285 2 22 154 2 32 154 3 16 96 96 3 48 4 55 11 4 59 55 20 5 5 5 20 64
