Microeconomics (Christopher T.S. Ragan) (z-lib.org)

not be taken as an indication that consumers are irrational, but rather that economists’ models are missing some important eleme ...

Chapter Outline 13.1 The Demand for Factors 13.2 The Supply of Factors 13.3 Factor Markets in Action AFTER STUDYING THIS CHAPTER ...

example, if one objective of government policy is to encourage individual workers to save more for their retirement, then presen ...

production, of course. Physical capital and land are also important. Why does a hectare of farmland in Northern Saskatchewan ren ...

The Consumer’s Demand Curve To derive the consumer’s demand curve for a product, we need to ask what happens when there is a cha ...

13.1 The Demand for Factors Firms require the services of land, labour, and capital to be used as inputs. Firms also use as inpu ...

marginal utility of juice rises sufficiently that Equation 6-2 is restored. In other words, her utility-maximizing response to a ...

until the last unit of that factor adds as much to revenue as it does to costs. Profit-maximizing firms will hire units of a var ...

Figure 6-2 Market and Individual Demand Curves Market Demand Curves If this is what each consumer does, it is also what all cons ...

This condition applies to any firm and any factor, in any market structure. In the special case of competitive goods and factor ...

The market demand curve is the horizontal sum of all the individual demand curves. At any given price, the quantity demanded by ...

To maximize its profits, any firm must hire each factor of production to the point where the factor’s marginal revenue product j ...

6.2 Income and Substitution Effects of Price Changes We have just seen the relationship between the law of diminishing marginal ...

Figure 13-1 From Marginal Product to Demand Curve The Firm’s Demand Curve for a Factor Now that we have determined the firm’s pr ...

Let’s now explore these two separate effects in a little more detail. The Substitution Effect To isolate the effect of the chang ...

The law of diminishing marginal returns implies that firms have a negatively sloped demand curve for factors of production. In p ...

The substitution effect increases the quantity demanded of a product whose price has fallen and reduces the quantity demanded of ...

Equation 13-2 states that a profit-maximizing competitive firm will employ additional units of the factor up to the point at whi ...

The Income Effect To examine the substitution effect, we reduced Tristan’s money income following the price reduction so that we ...

Study Exercises 13 and 14 at the end of this chapter to work through an example of a firm hiring workers in a factory that makes ...