1The demand for a resource is a (constant, derived) ________________ demand that depends on the productivity...

1The demand for a resource is a (constant, derived) ________________ demand that depends on the productivity of the resource and the price of the product made from the resource. 2.If the firm hires the resource in a purely competitive market, the marginal resource (cost, product) ______ will be (greater than, less than, equal to) _______ the price of the resource. 3.The demand for a resource will change if the (demand, supply) ___________ of the product the resource produces changes. 4.The output of the firm being constant, a decrease in the price of resource A will induce the firm to hire (more, less) ____ of resource A and (more, less)____ of other resources; this is called the (substitution, output) _____ effect. 5.A decrease in the price of a complementary resource will cause the demand for labor to (increase, decrease) __________. 6.If the marginal product of labor declines slowly when added to a fixed stock of capital, the demand for labor (MRP) will decline (rapidly, slowly) ___________. 7.The larger the number of good substitutes available for a resource, the (greater, less) ___________ will be the elasticity of demand for a resource. 8.If the marginal revenue product (MRP) of a resource is equal to the price of that resource, the marginal revenue product (MRP) divided by its price is equal to (1, infinity) __________. 9.Give four reasons why it is important to study resource pricing. 10.What are three factors that determine the elasticity of demand for a resource?

Expert Solution

Answer1) 1The demand for a resource is a derived demand that depends on the productivity of the resource and the price of the product made from the resource.

3) The demand for a resource will change if the demand of the product the resource produces changes. A change in product demand will cause similar change in the demand for theresources used in its production. A change in the productivity of a resource will change the demand for it (an increase in productivity increases demand.

5) A decrease in the price of a complementary resource will cause the demand for labor to increase. An increase in price of a complementary resource will cause the demand for labor to decrease.

7) The larger the number of good substitutes available for a resource, the greater will be the elasticity of demand for a resource. Price elasticity of demand is fundamentally about substitutes. If it’s easy to find a substitute product when the price of a product increases, the demand will be more elastic. If there are few or no alternatives, demand will be less elastic.

Rahul Sunny answered 7 months ago

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