Economics (Irwin Economics)
Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
Question
Chapter 16, Problem 1DQ
To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer
Check Mark

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources.  The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources.  Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
. Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day. LO17.8   What is the current labor cost per car sold? Suppose that when the dealer raises the price of labor to $30 per hour the average number of cars sold by a salesperson increases to two per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? Suppose that if the wage is raised a second time to $40 per hour the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold? If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?…
Ma2. Required:   Question 3.(LO3 Apply)   Simon Ltd is run by Simon Leather who makes leather belts for designers. He uses the finest Argentinean   leather and needs highly trained machinists to make the belts up to the quality designers expect. His beits usually sell for £50 per item and use 0.2m² of leather and 30 minutes of labor. Simon Ltd has 5 staff. They work a standard 8-hour day, 5 days a week, 48 weeks of the year. They earn £15 per hour.   Leather costs £20 per meter. Simon also has some variable overheads of £6 per unit. Fixed overheads are £28,800.   a) Calculate the number of belts Simon will have to sell to break even.    Simon decides to branch out and start to also sell handbags to the same market. The handbags sell for €250 each and use 1.5m² of leather with 1 hour of labor being required. Variable overheads are £20 per handbag.   There has been a bad case of foot and mouth in Argentina. Simon can only use the leather he has currently being shipped to him for the next…
Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1,000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month. LO17.6 Now consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $6.20 per hour, what will the firm’s economic profit or loss be per acre? At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?
Knowledge Booster
Similar questions
  • Consider shopping for cucumbers in a farmers’market. For each statement below, note whichcharacteristic of competitive markets the statement describes. Choose from: standardized good,full information, no transaction costs, and participants are price takers. [LO 3.1]a. All of the farmers have their prices postedprominently in front of their stalls.b. Cucumbers are the same price at each stall.c. There is no difficulty moving aroundbetween stalls as you shop and choosingbetween farmers.d. You and the other customers all seem indifferent about which cucumbers to buy.
    An economist estimated that the cost function of a single-product firm isC(Q) = 100 + 20Q + 15 Q^2+ 10 Q^3Based on this information, determine: (LO4, LO5)a. The fixed cost of producing 10 units of output.
    PROBLEMS 1. Workers are compensated by firms with “benefits” in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000, workers at one steel plant were paid $20 per hour and in addition received health benefits at the rate of $4 per hour. Also suppose that by 2010 workers at that plant were paid $21 per hour but received $9 in health insurance benefits. LO17.1   By what percentage did total compensation (wages plus benefits) change at this plant from 2000 to 2010? What was the approximate average annual percentage change in total compensation? By what percentage did wages change at this plant from 2000 to 2010? What was the approximate average annual percentage change in wages? If workers value a dollar of health benefits as much as they value a dollar of wages, by what total percentage will they feel that their incomes have risen over this time period? What if they only consider wages when calculating their incomes?…
    • SEE MORE QUESTIONS
    Recommended textbooks for you
  • ENGR.ECONOMIC ANALYSIS
    Economics
    ISBN:9780190931919
    Author:NEWNAN
    Publisher:Oxford University Press
    Principles of Economics (12th Edition)
    Economics
    ISBN:9780134078779
    Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
    Publisher:PEARSON
    Engineering Economy (17th Edition)
    Economics
    ISBN:9780134870069
    Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
    Publisher:PEARSON
  • Principles of Economics (MindTap Course List)
    Economics
    ISBN:9781305585126
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Managerial Economics: A Problem Solving Approach
    Economics
    ISBN:9781337106665
    Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
    Publisher:Cengage Learning
    Managerial Economics & Business Strategy (Mcgraw-...
    Economics
    ISBN:9781259290619
    Author:Michael Baye, Jeff Prince
    Publisher:McGraw-Hill Education
  • ENGR.ECONOMIC ANALYSIS
    Economics
    ISBN:9780190931919
    Author:NEWNAN
    Publisher:Oxford University Press
    Principles of Economics (12th Edition)
    Economics
    ISBN:9780134078779
    Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
    Publisher:PEARSON
    Engineering Economy (17th Edition)
    Economics
    ISBN:9780134870069
    Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
    Publisher:PEARSON
    Principles of Economics (MindTap Course List)
    Economics
    ISBN:9781305585126
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Managerial Economics: A Problem Solving Approach
    Economics
    ISBN:9781337106665
    Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
    Publisher:Cengage Learning
    Managerial Economics & Business Strategy (Mcgraw-...
    Economics
    ISBN:9781259290619
    Author:Michael Baye, Jeff Prince
    Publisher:McGraw-Hill Education