Factor Markets
IN THIS CHAPTER
Summary:We have invested significant time reviewing the forces of supply
and demand in the competitive market for goods and services. In addition,
we have investigated the theory behind production and cost, but have not
brought market forces to bear on those input, or factor, markets. We begin
with the demand for inputs in a perfectly competitive input market, and then
move to the supply of inputs and construct a model of wage and employ-
ment. We tweak the competitive model by allowing for some monopoly
hiring behavior. How is the wage of college professors determined? Can we
predict whether employment of steel workers is going to grow or decline?
A study of input markets sheds some light on many important microeconomic
issues that have critical macroeconomic implications.Key Ideas
JFactor Demand
JLeast-Cost Hiring of Inputs
JFactor Supply
JEquilibrium in Competitive Factor Markets
JNon-Competitive Factor MarketsKEY IDEA140 á
CHAPTER
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