resource markets
Resource Markets
Chapter 11
Resource Markets
In this chapter, we examine the supply and demand for resources used in the production of goods and services rather than for final products.
Resources include: land, labor, capital, and entrepreneurial ability.
Resource Demand
Wal Mart Example
Lawn Mowing Example
Farm Land Example
In each of the examples above, the producer will demand an additional unit of a resource as long as its marginal revenue exceeds its marginal cost.
Resource Supply
Two identical jobs example.
Different jobs with identical pay example.
Resource owners will supply their resources to the highest-paying alternative, ceteris paribus.
The Roles our Actors Play
In the market for goods and services, or the product market, householders are the demanders and firms are the suppliers.
In the resource market, the opposite occurs: householders and are the suppliers of the resources and firms are the demanders of the resources!
The Roles our Actors Play
Firms demand resources at as low a cost as they can get them in order to maximize profit.
Households supply resources at as high a price as they can earn in order to maximize utility.
These conflicting goals between profit maximizing firms and utility maximizing households are sorted out through voluntary exchange in the market.
Derived Demand for Resources
The only reason a firm places any value on a resource is because it is needed to produce the goods and services sold by the firm.
Therefore, the value of any resource depends upon the value of what it produces.
Thus, the demand for any resource is derived from the demand for the final product.
Market Demand for Resources
The market demand for a resource is the sum of the demands for that resource in all of its different uses.
For example, the demand for the resource, timber, sums up the demands for timber as lumber, railway ties, firewood, furniture, toothpicks, paper, pencils, etc.
Demand Curve for Resources
As
Chapter 11
Resource Markets
In this chapter, we examine the supply and demand for resources used in the production of goods and services rather than for final products.
Resources include: land, labor, capital, and entrepreneurial ability.
Resource Demand
Wal Mart Example
Lawn Mowing Example
Farm Land Example
In each of the examples above, the producer will demand an additional unit of a resource as long as its marginal revenue exceeds its marginal cost.
Resource Supply
Two identical jobs example.
Different jobs with identical pay example.
Resource owners will supply their resources to the highest-paying alternative, ceteris paribus.
The Roles our Actors Play
In the market for goods and services, or the product market, householders are the demanders and firms are the suppliers.
In the resource market, the opposite occurs: householders and are the suppliers of the resources and firms are the demanders of the resources!
The Roles our Actors Play
Firms demand resources at as low a cost as they can get them in order to maximize profit.
Households supply resources at as high a price as they can earn in order to maximize utility.
These conflicting goals between profit maximizing firms and utility maximizing households are sorted out through voluntary exchange in the market.
Derived Demand for Resources
The only reason a firm places any value on a resource is because it is needed to produce the goods and services sold by the firm.
Therefore, the value of any resource depends upon the value of what it produces.
Thus, the demand for any resource is derived from the demand for the final product.
Market Demand for Resources
The market demand for a resource is the sum of the demands for that resource in all of its different uses.
For example, the demand for the resource, timber, sums up the demands for timber as lumber, railway ties, firewood, furniture, toothpicks, paper, pencils, etc.
Demand Curve for Resources
As