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?
What will be an ideal response?
The demand for a resource is “derived” from or depends on the demand for the goods and services that the resource can produce. For example, the demand for workers in the computer industry depends on the demand for computers.
Underlying the demand for resources are two other critical factors. First, the demand for resources depends on the marginal productivity of the resource. Second, the demand for a resource depends on the price of the product that the resource produces. The two factors are related through the concept of marginal revenue product, which is the basis for the resource demand curve. In pure competition, marginal revenue product for an additional unit of a resource is simply the marginal productivity of the resource multiplied by product price.
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A temporary beneficial productivity shock would
A) shift the labor supply curve down and to the right. B) increase the level of employment. C) increase future income. D) increase the expected future marginal product of capital.
Suppose the market in Figure 9.4 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will
A) fall by $50. B) fall by $350. C) remain the same. D) rise by $50. E) rise by $350.
If the United States CPI was 37 in 1973 and in 2016 it was 215.3. By what percent did prices increase in the United States between 1973 and 2016? (Not the annual rate of change, but total.)
A. 5 B. 482 C. 545 D. 48
Economic growth
A. Is an increase in output or real GDP. B. Involves reduced capacity in the short run. C. Causes a contraction in the production possibilities curve. D. None of the choices are correct.