Chapter Outline
13.1 The Demand for Factors
13.2 The Supply of Factors
13.3 Factor Markets in ActionAFTER STUDYING THIS CHAPTER YOU WILL BE ABLE TO
What determines the wages that individuals earn? What explains why
neurosurgeons usually are paid more than family doctors, or why movie
stars are paid more than “extras”? Labour is not the only factor of
Learning Objectives (LO)
1. determine a profit-maximizing firm’s demand for a factor of
production.
2. examine the role of factor mobility in determining factor supply.
3. distinguish between temporary and equilibrium factor-price
differentials.
4. discuss “economic rent” and how it relates to factor mobility.