Chp.18

Chapter 18 is about capital, the economy's stock of equipment and structures supply and demand for land, labor, and capital determine the prices paid to workers, landowners, and capital owners. It talks about factors of production: the inputs used to produce goods and services (labor, land, and capital are the most important. In addition, the derived demand is a firm's demand for a factor of production is derived from its decision to supply a good in another market. Most labor services are inputs into the production of other goods. In competitive profit maximizing firm we assume (1)it's competitive for supply and demand (only decides how much to produce and how may workers to hire), (2)it's profit maximizing so the firm doesn't directly care about the number of workers it has or the number of the item it produces (only cares about profit). The production function: the relationship between the quantity of inputs used to make a good and the quantity of output of that good. The marginal product of labor is the increase in the amount of output from an additional unit of labor change in quantity / change in labor. The diminishing marginal product is also the property whereby the marginal product of an input declines as the quantity of input increases illustrates why the production function gets flatter as the quantity of input rises. The value of the marginal product is the marginal product of an input times the price of the output, price x MPL = VMPL, depends on the number of workers.