Reading/Study Guide – Chapter 12 – The Demand For Resources
Answer the following:
- Explain the concept of derived demand as it applies to resource demand.
- Define marginal revenue product:
- Define marginal resource cost:
- State the principle employed by a profit maximizing firm in determining how much of a resource it will employ.
- Draw side by side graphs of a perfectly competitive labor market and firm. Apply the MRP = MRC principle to find the quantity of workers a firm will employ.
- Using your above graphs, show what would happen to the number of workers hired by a firm if the output market price increased.
- Again, using the same graph as above, show what would happen to the number of workers a firm would hire if workers become more productive?
- List the three determinants of demand for a resource and explain how a change in each of the determinants would affect the demand for the resource.
- State the rule for determining the least cost combination of resources:
- State the rule for determining the profit maximizing combination when using more than one resource: