resources, why?
money income determination, cost minimization, resource allocation, poliicy issue
assume:
purely competitive
wage taker
demand (derived)
resource demand comes from product demand:
everything that comes from making a good
marginal productivity theory of product demand
MRP=MRC=D
least cost rule
max profit must
MP/P=MP/P
max profit
MRP/P=MRP/P=1
marginal productivity theory of income distribution
wage equals value of labor
criticisms:
1. inequality
2. market imperfections
wage rate
price per unit labor
nominal ($ payed)
real (whats bought w/nom)
productivity
- plentiful capital
- abundant natural resources
- advanced tech
- labor quality
- other (size,specialization)
purely comp. labor mrkt
- large # firms hiring
- wage takers
- workers have same skills
assume: non-union, indiviually compete
monopsony
non-competitive
- single buyer
- workers immobile
- wage makers
minimum wage
wage floor helps less skilled workers
wage differentials
diff salaries among occupations 1. supply+demand 2. marginal revenue productivity supply: - noncompeting -workers not homogenous
higher ed = higher income, why?
- fewer educated workers
- more productivity
- compensating difference
market imperfections
- lack of job information
- geopraphic immobility
- unions and gov. restrictions
- discrimination
alt to min wage
- piece rates
- commisions/royalties
- bonuses
- stock options
- profit sharing
negatives to pay for performance
- produce faster=poor quality
- questionable sales practivce
- who earns?
- free riding
- executive manipulation
- no turnover
economic rent
price paid for land/resources in fixed supply assume: 1. single use 2. smae quality 3. competitive market 4. derived demand 5. demand is downward
interest range of rates
- risk
- maturity
- size of loan
- taxability
loanable funds theory of interest
supply when rates high, demand when rates low
