CH16:Demand for resources

Question 1

What is resource demand

Answer 1

amount of resource a buyer is willing and able to buy at different pricrs

Question 2

Why is resource price important?

Answer 2

Cost minimization
Money
Policy issue
Resource allocation

Question 3

What is derived demand?

Answer 3

Resource demand depends on the demand of the product it helps to produce

Question 4

What is an assumption about resource demand?

Answer 4

the firms sell the output in perfect competitive market.

Question 5

What does resource demand depend on?

Answer 5

Resource productivity
Market value/price

Question 6

Marginal revenue product

Answer 6

Change in total revenue/Unit change in resource quantity

Question 7

Marginal resource cost

Answer 7

Change in total resource cost/ unit change in resource quantity

Question 8

What is the profit maximizing amount?

Answer 8

MRP=MRC

Question 9

Marginal product

Answer 9

Change in output/change in workers

Question 10

What factors affect resource demand?

Answer 10

Change in the product demand
Change in productivity
Change in price of other resources

Question 11

Factors that increase labor demand

Answer 11

Increase in product demand
Increase in productivity of labor
Price of substitute input decreases
Price of complementary decreases

Question 12

What are the factors affecting elasticity for resource demand?

Answer 12

Ease of resource substitution
elasticity of product demand
ratio of resource cost to total cost

Question 13

How does a competitive firm select it’s combination of resources?

Answer 13

Marginal product of labor/price of labor=marginal product of capital/price of capital

MRP(L)/P(L)=MRP(C)/P(C)=1