DeVry University, Chicago

ECON ECON312

Chapter 14

1)Why aren’t the tools of product market analysis directly applicable to the resource market?

 

 

 

2. Why is the demand for resources called a “derived” demand? On what two factors does the strength of the demand for resources depend? How are these two factors related?

 

 

 

3. Why is the marginal revenue product schedule a demand schedule for the individual firm in a purely competitive resource market and selling output in a purely competitive product market?

 

 

4. What is the difference between the demand curve for a resource under pure competition and under imperfect competition?

 

 

5. Contrast the factors that underlie the downsloping resource demand curve with those which underlie the downsloping product demand curve.

 

 

6.  What is the difference between a change in resource demand and a change in the quantity of a resource demanded? What factors contribute to a change in resource demand or a change in the quantity of a resource demanded?

 

 

7.  How will a change in productivity change the demand for a resource? What three factors will affect productivity?

 

 

8. Does it matter whether capital and labor are substitutes or complements when figuring out what will happen to the demand for labor if the price of capital increases? Explain.

 

 

 

9. Compare and explain the significance of the substitution and output effects as they apply to resource pricing. What relationship, if any, do they bear to the income and substitution effects discussed in connection with product demand?

 

 

10. Indicate how the following events will shift the firm’s demand curve for labor: increase it (I); decrease it (D); keep it the same (S).

 

          Technological advances increase labor’s productivity.

          The wage rate increases.

          The demand for the product that labor produces decreases.

          The wage rate decreases.

          Absenteeism reduces labor’s productivity.