Ch 18. The Markets for Factors of Production

.title[
# Ch 18. The Markets for Factors of Production
]
.subtitle[
## Microeconomics for Students of Accounting, Finance, and Digital Applications
]
.author[
### Lyuben Ivanov, PhD
]
.institute[
### Sofia University St. Kliment Ohridski
]
.date[
### Fall Term 2024/2025
]

---

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  .font200[
<strong>  Introduction</strong>
]
<hr>

---

# Introduction

This course is designed to

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    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">introduce YOU to the basic concepts and models of microeconomics</td>
  </tr>
</table>

YOU have already

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    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-chevron-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">mastered the supply and demand model</td>
  </tr>
</table>

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    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-chevron-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">learned how to apply it to better understand the pricing of goods and services that YOU buy on a daily basis</td>
  </tr>
</table>

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    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-chevron-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">learned the welfare implications of the model from the point of view of society as a whole</td>
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Now YOU are going to learn how to apply the supply and demand model to better understand how the value of YOUR labour is determined in a market economy!

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  .font200[
<strong>  Case Study: Avocado Farming</strong>
]
<hr>

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  .font200[
<strong>  Economic Theory and Application</strong>
]
<hr>

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# Factors of Production

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>factors of production</b></td>
    <td> </td>
    <td> </td>
    <td>the inputs used to produce goods and services</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> a firm uses physical space (<b>land</b>) and provides an office, a desk and a computer (<b>capital</b>) to an accountant whose time (<b>labour</b>) is used for the production of <b>cars</b> </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> the markets for factors of production are similar to the markets for goods and services BUT the demand for factors of production is a <b>derived demand</b> </td>
  </tr>
</table>

---

# Slide Completion Task

Please list below each category three specific examples of inputs that are necessary for avocado production.

**Labour**
1. .can-edit[]
2. .can-edit[]
3. .can-edit[]
]

---

# Quick Test

<div class="container">
    <div class="question">
        <p>Which of the following best describes the economy’s stock of equipment and structures?</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceA10" value="A">
        <label class="form-check-label" for="choiceA10">
            long-term inventory
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceB10" value="B">
        <label class="form-check-label" for="choiceB10">
            capital
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceC10" value="C">
        <label class="form-check-label" for="choiceC10">
            aggregate demand
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceD10" value="D">
        <label class="form-check-label" for="choiceD10">
            aggregate stock
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('B', 'result10', 'choice10')">Submit</button>
    <div class="result" id="result10"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>Which of the following best illustrates the concept of “derived demand?”</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice9" id="choiceA9" value="A">
        <label class="form-check-label" for="choiceA9">
            An increase in the wages of autoworkers will lead to an increase in the demand for robots in automobile factories.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice9" id="choiceB9" value="B">
        <label class="form-check-label" for="choiceB9">
            An increase in the price of gasoline will lead to an increase in the demand for small cars.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice9" id="choiceC9" value="C">
        <label class="form-check-label" for="choiceC9">
            An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice9" id="choiceD9" value="D">
        <label class="form-check-label" for="choiceD9">
            An automobile producer's decision to supply more minivans results from a decrease in the demand for station wagons.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('C', 'result9', 'choice9')">Submit</button>
    <div class="result" id="result9"></div>
  </div>

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# The Market for Avocados

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# The Market for Avocado Pickers

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  .font200[
<strong>  The Demand for Labour</strong>
]
<hr>

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# The Avocado Farm Example

To understand what determines the demand for labour we consider a hypothetical farm that produces avocados by hiring (demanding) avocado pickers.

We make two key assumptions:

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    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-chevron-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">the farm participates in competitive markets (it is price taker both when it sells avocados and when it buys labour)</td>
  </tr>
</table>

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-chevron-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">the farm owner's objective is to maximize the farm's profit</td>
  </tr>
</table>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>Gertrude Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crewmembers for each boat. In the market for fresh Pacific salmon, there are thousands of boats like Gertrude’s. If Gertrude is a price taker in the labor market, she decides</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceA10" value="A">
        <label class="form-check-label" for="choiceA10">
            the price for which she will sell the fish she catches.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceB10" value="B">
        <label class="form-check-label" for="choiceB10">
            the wages that she will pay to her crewmembers.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceC10" value="C">
        <label class="form-check-label" for="choiceC10">
            how many crewmembers she will hire.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice10" id="choiceD10" value="D">
        <label class="form-check-label" for="choiceD10">
            All of the answers are correct.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('C', 'result10', 'choice10')">Submit</button>
    <div class="result" id="result10"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>Gertrude Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crewmembers for each boat. In the market for fresh Pacific salmon, there are thousands of boats like Gertrude’s. Labor market theory assumes that Gertrude's demand for crewmembers and her supply of fresh Pacific salmon results from her</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceA11" value="A">
        <label class="form-check-label" for="choiceA11">
            altruistic motives to provide fresh salmon to consumers.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceB11" value="B">
        <label class="form-check-label" for="choiceB11">
            primary goal of maximizing profit.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceC11" value="C">
        <label class="form-check-label" for="choiceC11">
            desire to strike a balance between environmental concerns and maximum profit.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceD11" value="D">
        <label class="form-check-label" for="choiceD11">
            intrinsic desire to hire crewmembers.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('B', 'result11', 'choice11')">Submit</button>
    <div class="result" id="result11"></div>
  </div>

---

# The Production Function

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>production function</b></td>
    <td> </td>
    <td> </td>
    <td>the relationship between the quantity of inputs used to make a good and the quantity of output of that good</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the farm hires 1 avocado picker it would produce 100 kg of avocado per month, if the firm hires 2 avocado pickers it would produce 180 kg of avocados per month </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> for educational purposes, we use a production function that assumes that all  other factors of production are held constant </td>
  </tr>
</table>

---

# The Production Schedule

<table class="none">
  <tr>
    <th>Number of workers (L)</th>
    <th>Quantity of output (Q)</th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;0</td>
  </tr>
  <tr>
    <td style="text-align: center">1</td>
    <td style="text-align: center">100</td>
  </tr>
  <tr>
    <td style="text-align: center">2</td>
    <td style="text-align: center">180</td>
  </tr>
  <tr>
    <td style="text-align: center">3</td>
    <td style="text-align: center">240</td>
  </tr>
  <tr>
    <td style="text-align: center">4</td>
    <td style="text-align: center">280</td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">300</td>
  </tr>
  
---

# The Production Graph

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# Marginal Product

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>marginal product of labour</b></td>
    <td> </td>
    <td> </td>
    <td>the increase in the amount of output from an additional unit of labour</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> the marginal product of the first worker is 100 kg of avocados, the marginal product of the second worker is 80 kg of avocado, the marginal product of the third worker is 60 kg of avocado, etc. </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> in mathematics the calculation of marginal values deepens the analysis and is usually a prelude to finding an optimum </td>
  </tr>
</table>

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# The Production Schedule

<table class="none">
  <tr>
    <th>Number of workers (L)<br>&nbsp;</th>
    <th>Quantity of output (Q)<br>&nbsp;</th>
    <th>Marginal product of labour (MPL) <br><i>MPL = &Delta; Q/&Delta; L</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;0</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center">1</td>
    <td style="text-align: center">100</td>
    <td style="text-align: center">100</td>
  </tr>
  <tr>
    <td style="text-align: center">2</td>
    <td style="text-align: center">180</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;80</td>
  </tr>
  <tr>
    <td style="text-align: center">3</td>
    <td style="text-align: center">240</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;60</td>
  </tr>
  <tr>
    <td style="text-align: center">4</td>
    <td style="text-align: center">280</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;40</td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;20</td>
  </tr>
</table>

---

# Diminishing Marginal Product

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>diminishing marginal product</b></td>
    <td> </td>
    <td> </td>
    <td>the property whereby the marginal product of an input declines as the quantity of the input increases</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> the marginal product of an extra worker gradually falls from 100 to 80 kg of avocados as the farm adds more workers to the field </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> this assumption makes a lot of sense if we remember the assumption that the other factors of production are held constant </td>
  </tr>
</table>

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# Value of the Marginal Product

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>value of the marginal product</b></td>
    <td> </td>
    <td> </td>
    <td>the marginal product of an input times the price of the output (also known as marginal revenue product)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the price of avocados is constant at $10 per kg, the marginal revenue product of the first worker would be $1,000 (100 &times; $10), the marginal revenue product of the second worker would be $800 (80&times;$10), etc. </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> the constant price of avocados follows from the reasonable assumption that the avocado farm is a price taker in the market for avocados </td>
  </tr>
</table>

---

# Marginal Revenue Product

<table class="none">
  <tr>
    <th style="text-align: center">Workers (L)<br>&nbsp;</th>
    <th style="text-align: center">Output (Q)<br>&nbsp;</th>
    <th style="text-align: center">Marginal product of labour (MPL) <br><i>MPL = &Delta; Q/&Delta; L</i></th>
    <th style="text-align: center">Marginal revenue product (MRPL) <br> <i>MRPL = MPL &times; P</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&mdash;</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center">1</td>
    <td style="text-align: center">100</td>
    <td style="text-align: center">100</td>
    <td style="text-align: center">1,000</td>
  </tr>
  <tr>
    <td style="text-align: center">2</td>
    <td style="text-align: center">180</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;80</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;800</td>
  </tr>
  <tr>
    <td style="text-align: center">3</td>
    <td style="text-align: center">240</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;60</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;600</td>
  </tr>
  <tr>
    <td style="text-align: center">4</td>
    <td style="text-align: center">280</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;40</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;400</td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;20</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;200</td>
  </tr>
</table>

---

# Quick Test

<div>
    <p>A competitive firm sells its output for $60 per unit. It employs 50 workers, and the marginal product of the 50th worker is 6 units of output per day. It pays its workers a wage of $150 per day. How much is the marginal revenue product of the 50th worker?</p>
</div>

<div style="position: relative; top: 300px">
    <input type="text" id="userAnswer1" placeholder="Answer" class="input-field"><button onclick="checkAnswerO(360, 'result1', 'userAnswer1')" class="submit-button">Check</button>
</div>
<div id="result1"></div>

---

# Marginal Profit of Labour

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>marginal profit of labour</b></td>
    <td> </td>
    <td> </td>
    <td>the increase in the amount of profit (&Delta;&pi;) from an additional unit of labour(assuming that &Delta;L=1)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the marginal revenue product of the first worker is $1,000 and his or her wage is $500, hiring this worker results in marginal profit of $500 ($1,000 &mdash; $500) </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> remember the reasonable assumption that the firm is ultimately interested in maximizing its total profit </td>
  </tr>
</table>

---

# Marginal Profit of Labour

<table class="none">
  <tr>
    <th style="text-align: center">Workers (L)<br>&nbsp;</th>
    <th style="text-align: center">Marginal revenue product (MRPL) <br> <i>MRPL = MPL &times; P</i></th>
    <th style="text-align: center">Wage (W)<br>&nbsp;<br></th>
    <th style="text-align: center">Marginal profit (&Delta; &pi;) <br><i>&Delta; &pi; = MRPL &mdash;W</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&mdash;</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>1</strong></td>
    <td style="text-align: center">1,000</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><strong>500</strong></td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>2</strong></td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;800</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><strong>300</strong></td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>3</strong></td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;600</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><strong>100</strong></td>
  </tr>
  <tr>
    <td style="text-align: center">4</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;400</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;-100</td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;200</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;-300</td>
  </tr>
</table>

---

# Quick Test

<div>
    <p>A competitive firm sells its output for $70 per unit. It employs 40 workers, and the marginal product of the 40th worker is 5 units of output per day. It pays its workers a wage of $250 per day. How much is the marginal profit of the 40th worker?</p>
</div>

<div style="position: relative; top: 300px">
    <input type="text" id="userAnswer2" placeholder="Answer" class="input-field"><button onclick="checkAnswerO(100, 'result2', 'userAnswer2')" class="submit-button">Check</button>
</div>
<div id="result2"></div>

---

# Quick Test

]

<div class="container">
    <div class="question">
        <p>If a firm were employing fewer than Q* workers, hiring more workers would</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceA11" value="A">
        <label class="form-check-label" for="choiceA11">
            increase the firm's total profit.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceB11" value="B">
        <label class="form-check-label" for="choiceB11">
            decrease the price of the final good.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceC11" value="C">
        <label class="form-check-label" for="choiceC11">
            decrease the firm's total profit
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice11" id="choiceD11" value="D">
        <label class="form-check-label" for="choiceD11">
            increase marginal product.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('A', 'result11', 'choice11')">Submit</button>
    <div class="result" id="result11"></div>
  </div>
  
]

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  Movement Along the Demand <br>&nbsp;Curve for Labor</strong>
]
<hr>

---

# Law of Demand for Labour

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>law of demand for labour</b></td>
    <td> </td>
    <td> </td>
    <td>the claim that, other things being equal, the quantity of labour demanded rises when the market wage falls (and vice verse)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the wage drops to $300, the avocado farm will hire one more worker, if the wage rises to $700, the avocado farm will hire one less worker </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> this is a reasonable conclusion if we agree that it makes sense for a firm to only hire workers who contribute positively to its total profit (MPL > 0) </td>
  </tr>
</table>

---

# MPL When The Wage Drops

<table class="none">
  <tr>
    <th style="text-align: center">Workers (L)<br>&nbsp;</th>
    <th style="text-align: center">Marginal revenue product (MRPL) <br><i>MRPL = MPL &times; P</i></th>
    <th style="text-align: center">Wage (W)<br>&nbsp;</th>
    <th style="text-align: center">Marginal profit (&Delta; &pi;) <br><i>&Delta; &pi; = MRPL &mdash;W</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&mdash;</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>1</strong></td>
    <td style="text-align: center">1,000</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center"><strong>700</strong></td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>2</strong></td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;800</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center"><strong>500</strong></td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>3</strong></td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;600</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center"><strong>300</strong></td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>4</strong></td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;400</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center"><strong>100</strong></td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;200</td>
    <td style="text-align: center">300</td>
    <td style="text-align: center">&mdash;100</td>
  </tr>
</table>

---

# MPL When The Wage Rises

<table class="none">
  <tr>
    <th style="text-align: center">Workers (L)<br>&nbsp;</th>
    <th style="text-align: center">Marginal revenue product (MRPL) <br><i>MRPL = MPL &times; P</i></th>
    <th style="text-align: center">Wage (W)<br>&nbsp;</th>
    <th style="text-align: center">Marginal profit (&Delta; &pi;) <br><i>&Delta; &pi; = MRPL &mdash;W</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&mdash;</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>1</strong></td>
    <td style="text-align: center">1,000</td>
    <td style="text-align: center">700</td>
    <td style="text-align: center"><strong>300</strong></td>
  </tr>
  <tr>
    <td style="text-align: center"><strong>2</strong></td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;800</td>
    <td style="text-align: center">700</td>
    <td style="text-align: center"><strong>100</strong></td>
  </tr>
  <tr>
    <td style="text-align: center">3</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;600</td>
    <td style="text-align: center">700</td>
    <td style="text-align: center">&mdash;100</td>
  </tr>
  <tr>
    <td style="text-align: center">4</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;400</td>
    <td style="text-align: center">700</td>
    <td style="text-align: center">&mdash;300</td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;200</td>
    <td style="text-align: center">700</td>
    <td style="text-align: center">&mdash;500</td>
  </tr>
</table>

---

# Summary Task

.pull-left[
Use data from the table below to draw the demand curve for labour on the right-hand side of the slide.
<table class="none">
  <tr>
    <th style="text-align: center">Wage (W)</th>
    <th style="text-align: center">Number of workers (L)</th>
  </tr>
  <tr>
    <td style="text-align: center">700</td>
    <td style="text-align: center">2</td>
  </tr>
  <tr>
    <td style="text-align: center">500</td>
    <td style="text-align: center">3</td>
  </tr>
  <tr>
    <td style="text-align: center">300</td>
    <td style="text-align: center">4</td>
  </tr>
</table>
]

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  Non-Wage Determinants of <br>&nbsp;Labour Demand</strong>
]
<hr>

---

# <span style="position: relative; top: -75px">Factors That Shift the Demand Curve for Labour</span>

Since the market wage is on the vertical axis and the number of workers is on the horizontal axis of the supply and demand diagram, we can conclude that change in any factor, beside the market wage, that affects the number of workers demanded would result in a shift of the labour-demand curve on the supply and demand diagram!

There are three major factors and they all affect the marginal revenue product of labour: 
- Output price;
- Technological change;
- Supply of other factors of production.

---

# Quick Test

<div class="container">
    <div class="question">
        <p>When the market price of the firm's product (e.g. avocado) increases</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice1" id="choiceA1" value="A">
        <label class="form-check-label" for="choiceA1">
            each worker would be adding more value (profit) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice1" id="choiceB1" value="B">
        <label class="form-check-label" for="choiceB1">
            each worker would be adding more value (revenue) for the firm, resulting in decreased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice1" id="choiceC1" value="C">
        <label class="form-check-label" for="choiceC1">
            each worker would be adding less value (revenue) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice1" id="choiceD1" value="D">
        <label class="form-check-label" for="choiceD1">
            each worker would be adding more value (revenue) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('A', 'result1', 'choice1')">Submit</button>
    <div class="result" id="result1"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>When the firm introduces a new technology that increases the productivity of each worker</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice2" id="choiceA2" value="A">
        <label class="form-check-label" for="choiceA2">
            each worker would be adding more value (output) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice2" id="choiceB2" value="B">
        <label class="form-check-label" for="choiceB2">
            each worker would be adding more value (revenue) for the firm, resulting in decreased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice2" id="choiceC2" value="C">
        <label class="form-check-label" for="choiceC2">
            each worker would be adding less value (revenue) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice2" id="choiceD2" value="D">
        <label class="form-check-label" for="choiceD2">
            each worker would be adding more value (profit) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('D', 'result2', 'choice2')">Submit</button>
    <div class="result" id="result2"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>When the decrease in the amount of capital and land makes workers less productive</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice3" id="choiceA3" value="A">
        <label class="form-check-label" for="choiceA3">
            each worker would be adding more value (output) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice3" id="choiceB3" value="B">
        <label class="form-check-label" for="choiceB3">
            each worker would be adding more value (revenue) for the firm, resulting in decreased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice3" id="choiceC3" value="C">
        <label class="form-check-label" for="choiceC3">
            each worker would be adding less value (revenue) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice3" id="choiceD3" value="D">
        <label class="form-check-label" for="choiceD3">
            each worker would be adding more value (profit) for the firm, resulting in increased demand for labour, ceteris paribus.
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('C', 'result3', 'choice3')">Submit</button>
    <div class="result" id="result3"></div>
  </div>

---

# <span style="position: relative; top: -75px">Increase in the Marginal Revenue Product of Labour</span>

<table class="none">
  <tr>
    <th style="text-align: center">Workers (L)<br>&nbsp;</th>
    <th style="text-align: center">Marginal revenue product (MRPL) <br><i>MRPL = MPL &times; P<i></td>
    <th style="text-align: center">Wage (W)<br>&nbsp;</th>
    <th style="text-align: center">Marginal profit (&Delta; &pi;) <br><i>&Delta; &pi; = MRPL -W</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&mdash;</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center"><b>1</b></td>
    <td style="text-align: center">1,200</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><b>700</b></td>
  </tr>
  <tr>
    <td style="text-align: center"><b>2</b></td>
    <td style="text-align: center">1,000</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><b>500</b></td>
  </tr>
  <tr>
    <td style="text-align: center"><b>3</b></td>
    <td style="text-align: center">800</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><b>300</b></td>
  </tr>
  <tr>
    <td style="text-align: center"><b>4</b></td>
    <td style="text-align: center">600</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><b>100</b></td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">400</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center">-100</td>
  </tr>
</table>

---

# <span style="position: relative; top: -75px">Decrease in the Marginal Revenue Product of Labour</span>

<table class="none">
  <tr>
    <th style="text-align: center">Workers (L)<br>&nbsp;</th>
    <th style="text-align: center">Marginal revenue product (MRPL) <br><i>MRPL = MPL &times; P<i></td>
    <th style="text-align: center">Wage (W)<br>&nbsp;</th>
    <th style="text-align: center">Marginal profit (&Delta; &pi;) <br><i>&Delta; &pi; = MRPL -W</i></th>
  </tr>
  <tr>
    <td style="text-align: center">0</td>
    <td style="text-align: center">0</td>
    <td style="text-align: center">&mdash;</td>
    <td style="text-align: center">&mdash;</td>
  </tr>
  <tr>
    <td style="text-align: center"><b>1</b></td>
    <td style="text-align: center">800</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><b>300</b></td>
  </tr>
  <tr>
    <td style="text-align: center"><b>2</b></td>
    <td style="text-align: center">640</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center"><b>140</b></td>
  </tr>
  <tr>
    <td style="text-align: center">3</td>
    <td style="text-align: center">480</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center">-20</td>
  </tr>
  <tr>
    <td style="text-align: center">4</td>
    <td style="text-align: center">320</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center">-180</td>
  </tr>
  <tr>
    <td style="text-align: center">5</td>
    <td style="text-align: center">160</td>
    <td style="text-align: center">500</td>
    <td style="text-align: center">-340</td>
  </tr>
</table>

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  The Supply of Labour</strong>
]
<hr>

---

# Law of Supply of Labour

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>law of supply for labour</b></td>
    <td> </td>
    <td> </td>
    <td>the claim that, other things being equal, the quantity of labour supplied rises when the market wage rises (and vice verse)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the market wage rises to $700, the opportunity cost of leisure rises and some workers would substitute some leisure for work, resulting in increased quantity of workers supplied </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> according to the theory of consumer choice, the claim above is only valid if we assume that the substitution effect dominates the income effect of higher wages </td>
  </tr>
</table>

---

# <span style="position: relative; top: -75px">Factors That Shift the Supply Curve of Labour</span>

Since the market wage is on the vertical axis and the number of workers is on the horizontal axis of the supply and demand diagram, we can conclude that change in any factor, beside the market wage, that affects the number of workers supplying their labour would result in a shift of the labour-supply curve on the supply and demand diagram.

There are three major non-wage factors that affect the supply of labour in a given labour market: 
- changes in tastes;
- changes in alternative opportunities;
- immigration.

---

# Quick Test

<div class="container">
    <div class="question">
        <p>When the attitude towards work changes positively (e.g. more women decide to pursue career instead of being homemakers),</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice4" id="choiceA4" value="A">
        <label class="form-check-label" for="choiceA4">
            the supply of labour increases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice4" id="choiceB4" value="B">
        <label class="form-check-label" for="choiceB4">
            the quantity of labour supplied increases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice4" id="choiceC4" value="C">
        <label class="form-check-label" for="choiceC4">
            the supply of labour decreases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice4" id="choiceD4" value="D">
        <label class="form-check-label" for="choiceD4">
            the quantity of labour supplied decreases
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('A', 'result4', 'choice4')">Submit</button>
    <div class="result" id="result4"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>When the government increases the minimum wage in a state,</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice5" id="choiceA5" value="A">
        <label class="form-check-label" for="choiceA5">
            the supply of non-qualified labour in the state increases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice5" id="choiceB5" value="B">
        <label class="form-check-label" for="choiceB5">
            the quantity of non-qualified labour supplied in the state increases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice5" id="choiceC5" value="C">
        <label class="form-check-label" for="choiceC5">
            the supply of non-qualified labour in the state decreases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice5" id="choiceD5" value="D">
        <label class="form-check-label" for="choiceD5">
            the quantity of non-qualified labour supplied in the state decreases
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('B', 'result5', 'choice5')">Submit</button>
    <div class="result" id="result5"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>When the government increases the minimum wage in a state,</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice6" id="choiceA6" value="A">
        <label class="form-check-label" for="choiceA6">
            the supply of non-qualified labour in a neighbouring state increases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice6" id="choiceB6" value="B">
        <label class="form-check-label" for="choiceB6">
            the quantity of non-qualified labour supplied in a neighbouring state decreases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice6" id="choiceC6" value="C">
        <label class="form-check-label" for="choiceC6">
            the supply of non-qualified labour in the state decreases
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice6" id="choiceD6" value="D">
        <label class="form-check-label" for="choiceD6">
            the supply of non-qualified labour in a neighbouring state decreases
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('D', 'result6', 'choice6')">Submit</button>
    <div class="result" id="result6"></div>
  </div>

---

# Quick Test

<div class="container">
    <div class="question">
        <p>One of President-elect Donald Trump's core promises during the last election was to stop illegal immigration and deport millions of illegal immigrants out of the USA. If he succeeds in doing so,</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice7" id="choiceA7" value="A">
        <label class="form-check-label" for="choiceA7">
            the supply of non-qualified labour in USA would increase and the MRPL would decrease
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice7" id="choiceB7" value="B">
        <label class="form-check-label" for="choiceB7">
            the quantity of non-qualified labour supplied in USA would increase and the MRPL would decrease
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice7" id="choiceC7" value="C">
        <label class="form-check-label" for="choiceC7">
            the supply of non-qualified labour in USA would decrease and the MRPL would decrease
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice7" id="choiceD7" value="D">
        <label class="form-check-label" for="choiceD7">
            the supply of non-qualified labour in USA would decrease and the MRPL would increase
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('D', 'result7', 'choice7')">Submit</button>
    <div class="result" id="result7"></div>
  </div>

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  Equilibrium in the Labour Market</strong>
]
<hr>

---

# <span style="position: relative; top: -75px"> Increased Demand for Avocados: Effect on Market for Avocado Pickers</span>

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  The Demand for Capital</strong>
]
<hr>

---

# Capital

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>capital</b></td>
    <td> </td>
    <td> </td>
    <td>the equipment and structures used to produce goods and services</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> for an avocado farm the capital would consist of ladders, trucks, buildings, irrigation systems, avocado trees even </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> in the supply and demand model the purchase price of capital is a multiple of the rental price of capital (e.g. if the rental price of a truck is $10,000 per year, the purchase price of the truck would be $100,000 ($10,000 &times; 10), implying that the truck owner should get his or her investment back within 10 years) </td>
  </tr>
</table>

---

# The Market for Pick-up Trucks

---

# Law of Demand for Capital

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>law of demand for capital</b></td>
    <td> </td>
    <td> </td>
    <td>the claim that, other things being equal, the quantity of capital demanded rises when the rental price falls (and vice verse)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the rental price of pick up trucks drops, the farm would rent more trucks </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> this is a reasonable conclusion if we agree that it makes sense for a firm to only rent trucks who contribute positively to its total profit </td>
  </tr>
</table>

---

# <span style="position: relative; top: -75px"> Factors That Shift the Demand Curve for Capital</span>

There are three major factors and they all affect the marginal revenue product of capital &mdash; output price, technological change, and supply of other factors of production.

---

# Quick Test

<div class="container">
    <div class="question">
        <p>What would happen to the demand for irrigation systems in avocado farms if, Robert Francis Kennedy Jr., President-elect Trump's nominee for secretary of health and human services, incentivizes Americans to eat more friuts and vegetables?</p>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice8" id="choiceA8" value="A">
        <label class="form-check-label" for="choiceA8">
            the demand for irrigation systems would increase
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice8" id="choiceB8" value="B">
        <label class="form-check-label" for="choiceB8">
            the demand for irrigation systems would decrease
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice8" id="choiceC8" value="C">
        <label class="form-check-label" for="choiceC8">
            the demand for irrigation systems would stay the same
        </label>
    </div>
    <div class="form-check">
        <input class="form-check-input" type="radio" name="choice8" id="choiceD8" value="D">
        <label class="form-check-label" for="choiceD8">
            the demand for irrigation systems would increase or decrease depending on the price elasticity of demand for avocados
        </label>
    </div>
    <br>
    <button class="btn btn-custom mt-3" onclick="checkAnswer('A', 'result8', 'choice8')">Submit</button>
    <div class="result" id="result8"></div>
  </div>

---

# Drawing Task

.pull-left[
New self-driving technology makes trucks more productive. Draw the effect on the demand curve for pick-up trucks on the right-hand side of the slide.
]

---

# Drawing Task

.pull-left[
One of President-elect Trump's core promises during the last election was to stop illegal immigration and deport millions of illegal immigrants out of the USA. If he succeeds in doing so, how would this affect the demand for pick-up trucks in the USA? Draw the effect on the demand curve for pick-up trucks on the right-hand side of the slide.
]

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  The Demand for Land</strong>
]
<hr>

---

# Land

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>land</b></td>
    <td> </td>
    <td> </td>
    <td>the stock of all the natural resources of the earth (e.g. arable land)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> for an avocado farm the land would consist of the arable land on which the avocado trees grow </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> in the supply and demand model the purchase price of land is a multiple of the rental price of land (e.g. if the rental price of a decare of land is $10,000 per year, the purchase price of the piece of land would be $200,000 ($10,000 &times; 20), implying that the land owner should get his or her investment back within 20 years) </td>
  </tr>
</table>

---

# The Market for Arable Land

---

# Law of Demand for Land

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><b>law of demand for land</b></td>
    <td> </td>
    <td> </td>
    <td>the claim that, other things being equal, the quantity of land demanded rises when the rental price falls (and vice verse)</td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-globe"></i></td>
    <td> </td>
    <td> </td>
    <td> if the rental price of arable land drops, the farm would rent more land </td>
  </tr>
  <tr style="background-color: transparent;">
  <td>   </td>
  <td>   </td>
  <td>   </td>
  <td>   </td>  
  </tr>
  <tr style="background-color: transparent;">
    <td style="text-align: center; vertical-align: top;"><i class="fa fa-lightbulb-o"></i></td>
    <td> </td>
    <td> </td>
    <td> this is a reasonable conclusion if we agree that it makes sense for a firm to only rent land which contributes positively to its total profit </td>
  </tr>
</table>

---

# <span style="position: relative; top: -75px">Factors That Shift the Demand Curve for Land</span>

1. **Output price** &mdash; when the market price of the firm's product (e.g. avocado) increases, each decare of land would be adding more value (revenue) for the firm, resulting in increased demand for land, ceteris paribus

2. **Supply of other factors of production** &mdash; when the increase in the amount of other factors makes land more productive,it would be adding more output (revenue) for the firm, resulting in increased demand for land, ceteris paribus

3. **Technological change** &mdash; when it makes land more productive, land would be adding more output (revenue) for the firm, resulting in increased demand for land, ceteris paribus

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  Conclusion</strong>
]
<hr>

---

# Conclusions

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-lightbulb-o"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">According to the neoclassical theory, the market value of each factor of production depends on the supply and demand for that factor</td>
  </tr>
</table>

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-lightbulb-o"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">In equilibrium, each factor of production earns the value of its marginal contribution to the production of goods and services</td>
  </tr>
</table>

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-lightbulb-o"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">The markets for different factors of production are interlinked, highly interdependent, constantly adapting to changes in technology and consumer preferences, and rewarding the owners of different factors of production according to the factors' changing abilities to add value to the economy</td>
  </tr>
</table>

---

# Conclusion

.pull-right-2[
_I have deliberately used the word "marvel" to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind._
<hr style="background-color: black; margin: 0em 0em 0em 0em;">
<span style="float: right; font-variant: small-caps; "> Friedrich Hayek (1945) </span>
]

---

# Final Advice

If YOU want to improve your prospects for employment and income YOU should look for a job in a sector (or region) where

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-arrow-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">the demand for the sector's product is growing</td>
  </tr>
</table>

<table class="none">
  <tr style="background-color: transparent;">
    <td style="text-align: right; vertical-align: top; width: 50px;"><i class="fa fa-arrow-circle-right"></td>
    <td style="width: 20px"> </td>
    <td style="text-align: left; vertical-align: top; width: auto;">technological progress increases the productivity of workers in that sector (and the market is big enough to accommodate increases in production)</td>
  </tr>
</table>

---

# Questions?

<br>

</body>
</html>

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  Bonus Content: Reasons For <br>&nbsp;Earnings Differentials</strong>
]
<hr>

---

---

class: clear, middle, no-scribble
  
  .font200[
<strong>  Econ Duel: Is Education Signaling <br>&nbsp;Or Skill Building?</strong>
]
<hr>

---

---

# Thank You!

<br>