University:
East Georgia State College
Course:
BUSA 1105 | Introduction to Business
Academic year:

2022
Views:

346

Pages:

2
Author:

Alicia Velazquez

Unit 5: The Resource Market Key Terms Derived Demand The demand for resources is determined by the demand for the products they help produce. Marginal Revenue Product (MRP) The additional revenue generated by an additional resource. Marginal Resource Cost (MRC) The additional cost of an additional resource. Shifters of Labor Demand Changes in demand for the product Changes in productivity of the resource Changes in price of other resources Shifters of Labor Supply Changes in tastes and preferences Changes in population and demographics Changes in alternative opportunities Changes in education and training requirements Changes in immigration policies Changes in working conditions Calculating MRP and MRC and Hiring Workers Number of Workers Total Product Marginal Product Marginal Revenue Product Wage 0 0 1 5 5 25 20 2 13 8 40 20 3 18 5 25 20 4 21 3 15 20 5 20 -1 -5 20 Assume perfectly competitive product and labor markets. If the price of the product is $3 and the wage is $20, how many workers should be hired? Answer: 3 workers How much is the profit or loss? Profit = Total Revenue - Total Cost Profit = (3 * 18) - (20 * 3) = $6 Assume that this firm develops a process that makes only their workers more productive. The wage will: decrease increase stay the same Minimum Wage graph showing the impact of a minimum wage on the labor market What happens to the wage and quantity in the market and firm if new workers enter the industry? graph showing the impact of new workers on the labor market Industry: Wage: Decreases Quantity: Increases Firm: Wage: Decreases (remains the same as the market wage) Quantity: Decreases (due to lower demand for labor at the higher wage) Unit 6: Four Market Failures Public Goods Why are public goods a market failure? Impractical to provide them in a free market. Two Characteristics of Public Goods: Nonexcludability: People cannot be excluded from enjoying the benefits. Shared Consumption: One person's consumption of a good does not reduce the enjoyment of others. Maximizing Rule for Public Goods: MSB = MSC Negative Externalities Draw a negative externality graph with MSC > MSB Positive Externalities Draw a positive externality graph with MSC < MSB Solution: Tax Distribution of Income and Taxes Progressive Tax: Takes a larger percent of income from higher income groups. Proportional Tax: Takes the same percent from all income groups. Regressive Tax: Takes a larger percentage from lower income groups. Tax Incidence graph showing tax incidence Label the amount consumers and producers pay of tax.

The Resourse Market Answers

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