The document discusses labor markets and the markets for factors of production. It explains that firms demand factors of production based on the production of goods, and that labor demand is derived from a firm's production function. Equilibrium in labor and other factor markets is reached where the value of the marginal product equals the price for the factor. A shift in the supply or demand for a factor impacts the equilibrium price and quantity exchanged in its market as well as the earnings of other factors used in production.

1. 6 THE ECONOMICS OF LABOR MARKETS

2. 18 The Markets for the Factors of Production

6. Figure 1 The Versatility of Supply and Demand Copyright©2003 Southwestern/Thomson Learning Quantity of Apples 0 Price of Apples Quantity of Apple Pickers 0 Wage of Apple Pickers (a) The Market for Apples (b) The Market for Apple Pickers Demand Supply Demand Supply P Q L W

9. Table 1 How the Competitive Firm Decides How Much Labor to Hire Copyright©2004 South-Western

10. Figure 2 The Production Function Copyright©2003 Southwestern/Thomson Learning Quantity of Apple Pickers 0 Quantity of Apples 300 280 240 180 100 1 2 3 4 5 Production function

14. Figure 2 The Production Function Copyright©2003 Southwestern/Thomson Learning Quantity of Apple Pickers 0 Quantity of Apples 300 280 240 180 100 1 2 3 4 5 Production function

19. Figure 3 The Value of the Marginal Product of Labor Copyright©2003 Southwestern/Thomson Learning 0 Quantity of Apple Pickers 0 Value of the Marginal Product Value of marginal product (demand curve for labor) Market wage Profit-maximizing quantity

23. Figure 4 Equilibrium in a Labor Market Copyright©2003 Southwestern/Thomson Learning Wage (price of labor) 0 Quantity of Labor Supply

26. Figure 4 Equilibrium in a Labor Market Copyright©2003 Southwestern/Thomson Learning Wage (price of labor) 0 Quantity of Labor Supply Demand Equilibrium wage, W Equilibrium employment, L

28. Figure 5 A Shift in Labor Supply Copyright©2003 Southwestern/Thomson Learning Wage (price of labor) 0 Quantity of Labor Supply, S Demand 2. . . . reduces the wage . . . 3. . . . and raises employment. 1. An increase in labor supply . . . S W L W L

30. Figure 6 A Shift in Labor Demand Copyright©2003 Southwestern/Thomson Learning Wage (price of labor) 0 Quantity of Labor Supply Demand, D 2. . . . increases the wage . . . 3. . . . and increases employment. D W L W L 1. An increase in labor demand . . .

32. Table 2 Productivity and Wage Growth in the United States. Copyright©2004 South-Western

36. Figure 7 The Markets for Land and Capital Copyright©2003 Southwestern/Thomson Learning Quantity of Land 0 Rental Price of Land Quantity of Capital 0 Rental Price of Capital (a) The Market for Land (b) The Market for Capital Demand Supply Demand Supply Q P P Q