Factor Markets Cont.

In class students continued learning about factor markets (markets for land, labor and capital).  Students were introduced to the individual firm and also the market supply and demand curve.  Firms always hire labor until VMPL = MFC (or wage if it is perfectly competitive). 

We also looked at the difference between a perfectly competitive industry for labor and a factor market where competition is not perfectly competitive (imperfect competition).  We looked at a monopsony, which is a firm that is the only buyer(demand) for labor.  In this type of market, wage is below equilibrium as MFC>S. 

Students should also be able to differentiate between the income effect and the substitution effect when it comes to the an individual's supply of labor.

The notes are attached as is the homework.

Notes - Factor Markets Cont.

HW - Factor Markets Assignment
          Read Modules 72 and 73