Markets for the Factors of Production — Labor, Land, Capital, and Wage Determination Explained | Chapter 18 of Principles of Microeconomics
Markets for the Factors of Production — Labor, Land, Capital, and Wage Determination Explained | Chapter 18 of Principles of Microeconomics How are wages, rent, and profits determined in the economy? Chapter 18 of Principles of Microeconomics explores the markets for factors of production —labor, land, and capital—and explains how firms decide what to pay for these inputs based on their contribution to production. This summary covers key concepts such as derived demand, the marginal product of labor, and wage-setting in competitive and monopsony labor markets. 🎥 Watch the full chapter summary below and subscribe to Last Minute Lecture for more textbook breakdowns and academic study guides! Labor Markets and Wage Determination Firms hire workers based on the marginal product of labor (MPL) —the additional output from one more worker—and its value, the value of the marginal product of labor (VMPL) . Firms maximize profit by employing labor up to where VMPL equa...