1. Activity 45 & 46 derived demand for a resource The demand for a resource is called Derived Demand because it is derived from the demand for the goods and services that are produced by the resource

2. Quick review MPP - Marginal Physical Product (Marginal Product) –The additional output from an additional unit of input MR – Marginal Revenue –The additional revenue from an additional unit of output MRP – Marginal Revenue Product –The additional revenue from an additional unit of input

3. Complete the table and then plot MRP on the adjacent graph Note: in the competitive model, a competitive firm pays a wage set by supply and demand in an industries’ competitive labor market; the wage will be perfectly elastic Units of resource Total product MPPPriceTRMRP 00-$2$0- 120$240$40 250$2 370$2 485$2 595$2 6100$2 $35 $25 $20 $15 $5 $10 $40 $45 $50 $55 $60 $30 Resource Price Units of resource demanded 123 4560 Competitive wage

4. The MRP (Marginal Revenue Product) is the firm’s demand curve for the resource Units of resource Total product MPPPriceTRMRP 00-$2$0- 120 $240$40 25030$210060 37020$214040 48515$217030 59510$219020 61005$220010 $35 $25 $20 $15 $5 $10 $40 $45 $50 $55 $60 $30 Resource Price Units of resource demanded 123 4560 MRP = Demand for labor Competitive wage

5. Indicate in the short-run whether there would be an Increase, Decrease or No Change resulting from the following headlines SITUATIONMPPProduct Price Demand for Labor (A) A new yo-yo machine increases the productivity of labor (B) The price of yo-yos increases (C) Better training increases the output of yo-yo labor (D) The demand for yo-yos increases (E) Team spirit increases the output of yo-yos (F) Consumers become sick of yo-yos

6. Indicate in the short-run whether there would be an Increase, Decrease or No Change resulting from the following headlines SITUATIONMPPProduct Price Demand for Labor (A) A new yo-yo machine increases the productivity of labor UpNo change increase (B) The price of yo-yos increases No change Upincrease (C) Better training increases the output of yo-yo labor UpNo change increase (D) The demand for yo-yos increases No change Upincrease (E) Team spirit increases the output of yo-yos UpNo change increase (F) Consumers become sick of yo-yos No change DownDecrease

7. Note that when the model is not perfectly competitive; MRP is no longer equal to MPP x Price! As quantity is increasing, product price is decreasing (because of the law of diminishing marginal utility) so you can only look at the change in TR (Total Revenue / one) Units of resource (# of workers) Total product (Quantity)MPPPriceTRMRP 00-$0 - 120 $5.00$100 250$4.00 370$3.50 485$3.00 595$2.00 6100$1.00

8. Note that when the model is not perfectly competitive; MRP is no longer equal to MPP x Price! As quantity is increasing, product price is decreasing (because of the law of diminishing marginal utility) so you can only look at the change in TR (Total Revenue / one) Units of resource (# of workers) Total product (Quantity)MPP Product PriceTRMRP 00-$0 - 120 $5.00$100 25030$4.00200100 37020$3.5024545 48515$3.0025510 59510$2.00190-65 61005$1.00100-90