Chp. 18

Chapter eighteen is about the markets for the factors of production. The factors of production are the inputs used to produce goods and services (which are land, labor, and capital). Thee demand for a factor of producction is a deprived demand. A firms demand for a factor of producrtion is derived from its decision for supply a good in another market. Labor is the most important factor of production (workers receive the most of total income in the United States of America). The demand for laber: labor markets are governed by the forces of supply and demand. A competitive firm is a price taker. Hiring decisions take into consideration how the size of the workforce affects the amount of output produced. For example, how does the number od apple pickers affect the quantity of apples produced if it can harvest and sell the apples. Production function is the relationship between the quantity of inputs used to make a good and the quantity of output of that good. As  the quantity of the input increases the production function gets flattre reflecting the property of diminishing marginl product. Marginal product of labor is the increase in the amount of output from an additional unit of labor. Firms consider how much profit each worker would bring in. Because profit is total revenue minus total cost the profit from an additional worker is the workers contribution to revenue minus the workers wage.