101 lecture 18 factors of production

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101 lecture 18 factors of production

  1. 1. Next Exam ! Exam 6 Thursday December 26 ! Chapters 18, 19, 20 and 21
  2. 2. Microeconomics Lecture 18 ! Factors of Production
  3. 3. Price Discrimination ! Charging different people a different price for the same product
  4. 4. Price Discrimination ! Make more money by capturing buyer surplus ! Very hard to do ! Keep buyers from buying low and reselling higher to other customers
  5. 5. Riyadh Pizza Company Saudi Style Supreme 40 Perfect Competition 40 38 36 Keep selling as long as marginal revenue is more than marginal cost 34 30 32 30 28 26 Price Marginal Revenue 30 Marginal Cost 29 Profit Per Pizza 30 -29 = 1 20 Total Profit 6x1=6 10 0 Total Revenue 6 x 30 = 180 Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki Cannot charge more than 30 or buyers go to competitor Total Cost 6 x 29 = 174 Total Profit 180 - 174 = 6
  6. 6. Riyadh Pizza Company Saudi Style Supreme 40 Monopoly with Price Discrimination 40 38 36 Keep selling as long as marginal revenue is more than marginal cost 34 30 32 30 28 26 Marginal Cost 29 Profit Per Pizza Varies 20 Total Profit Add each profit 10 0 Total Revenue 210 Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki Charge different prices to different customers Total Cost 6 x 29 = 174 Total Profit 210 - 174 = 36
  7. 7. Riyadh Pizza Company Saudi Style Supreme Price Perfect Competition 30 Monopoly Price Discrimination 30 - 40 Difference up to 10 Qty 6 6 6 Total Revenue 180 210 30 Total Cost 174 174 174 6 36 30 Profit
  8. 8. Creating Value with the Five Capitals trust knowledge skills Human personality health relationships Physical Cultural trust values institutions infrastructure rules ! Intellectual ideas technology methods Value Creator entrepreneur innovator team organization natural resources time buildings equipment things than make things Financial money and risk savers - borrowers time is money (1+r)n insurance limited liability corporations
  9. 9. Factors of Production Labor market
  10. 10. Innovation - Productivity
  11. 11. Wage Level Professional Soccer Players $36 million 135 million SAR School Teachers Quantity of Labor
  12. 12. Derived Demand Depends on demand for another good the factor produces
  13. 13. Marginal Product of Labor How much more output with one more worker
  14. 14. Revenue not Output
  15. 15. Marginal Revenue Product of Labor How much more revenue with one more worker
  16. 16. Employees Total Output Marginal Output Product Marginal Revenue $1 each Marginal Cost $10 Marginal Profit 0 0 - - 1 19 19 $19 $10 $9 2 40 21 $21 $10 $11 3 57 17 $17 $10 $7 4 72 15 $15 $10 $5 5 80 8 $8 $10 -$2
  17. 17. Marginal Revenue Product of Labor versus Cost of Wage
  18. 18. Demand for Labor Human Capital Technology Price Inputs Firms
  19. 19. Supply for Labor Population Demographics Alternatives
  20. 20. Wage Level Supply $15 $10 Demand L1 Increase in Demand L2 Quantity of Labor
  21. 21. Wage Level Supply 15 10 Demand Q1 Q2 Increase in Supply Quantity of Labor
  22. 22. Economic Discrimination Difference due to irrelevant characteristic
  23. 23. Wage Gap Education Experience Preferences
  24. 24. Discrimination is Expensive
  25. 25. Compensating Differentials 95% of job-related deaths are men.
  26. 26. America’s 10 Most Dangerous Jobs Per 100,000 Average 3.3 Fishing 200 Logging 62 Pilot 57 Farm & Ranch 36 Roofers 35 Ironworkers 30 Sanitation 25 Machinist 19 Truck Driver 18 Construction 18 Source: Bureau of Labor Statistics

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