Page 556 - Economics

CONFIRMING PAGES

IN THIS CHAPTER YOU WILL LEARN:
• The significance of resource pricing.
• How the marginal revenue productivity of a
resource relates to a firm’s demand for that
25 • The factors that increase or decrease resource
resource.

demand.
• The determinants of elasticity of resource demand.
• How a competitive firm selects its optimal
combination of resources.

The Demand for Resources

When you finish your education, you probably will be looking for a new job. But why would someone
want to hire you? The answer, of course, is that you have much to offer. Employers have a demand
for educated, productive workers like you.
We need to learn more about the demand for labor and other resources. So, we now turn from the
pricing and production of goods and services to the pricing and employment of resources . Although firms
come in various sizes and operate under highly different market conditions, each has a demand for pro-
ductive resources. Firms obtain needed resources from households—the direct or indirect owners of land,
labor, capital, and entrepreneurial resources. So, referring to the circular flow model (Figure 2.4, page
39), we shift our attention from the bottom loop of the diagram (where businesses supply products that
households demand) to the top loop (where businesses demand resources that households supply).
This chapter looks at the demand for economic resources. Although the discussion is couched in terms
of labor, the principles developed also apply to land, capital, and entrepreneurial ability. In Chapter 26 we

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