Microeconomic Factors in the Price of Labor and Wages Essay

The company should not hire more than four days of labor because the firms gets a loss in profit of $20 on the firth day. The firm earns a marginal yield of $30 on the fifth day, which means that paying a wage of $50 will result into a marginal loss of $20.
Factors of production are the essential resources for the formation of goods or services. They include land, labor, and capital. Factors of production facilitate or allow the production a service or good however they do not constitute the final product for example a piece of plastic container. Labor is the human physical or mental effort into the production process and a certain wage is paid for such exertion. Land includes all natural resources that are not made by man. These include sunlight, mineral resource, water, and air. Capital is the physical products produced by labor to facilitate the production of services and goods.
The price of labor is the wage paid to people who participate in the production process, while the price for land is the amount paid as rent or buy factory or office space. The return on capital includes interest and capital gains.
Marginal product of labor is the measure of the output achieved by the last worker. It is the productivity that results from hiring an added worker, with all factors remaining constant. Its value of labor is obtained by dividing the variations in Output (Y) by the unit variation in labor (L). Marginal product of capital is the additional productivity resulting from implementation of an added unit of capital with all other factors held constant. Marginal product of capital is calculated by dividing the change in output with the change in capital. The value of marginal product of land is determined by dividing the change in output with the change in land.
In achieving market equilibrium for labor and capital, the quantity of labor and wage adjusts to balance supply and demand. This implies that each firm hires as many workers as possible provided it is profitable to do so at equilibrium wage or until the marginal product equal the wage paid to workers. In case of an increase in demand for the final product, the equilibrium wage and the value of marginal product would also increase with the same amount so that they can be equal. This means that an increase in demand for the product leads to an increase in its price and increase the demand for the factors of production.
Yes. This is due to the fact that consumers with discriminatory preferences are willing to pay to avoid contact with a certain type of worker, which forces firms to employ a certain type of employee. For example, if white males do not like buying services or goods from females or minorities, then the consumer discrimination will reduce the demand for the services and goods sold by these workers. Because the input of labor is derived from input, a fall in demand for the final product will result into decrease in demand for the labor, thereby decreasing the wages paid to females and minorities.
Diminishing marginal utility as a concept describes the decrease in desire for more of the same service or product. Conventionally, the more one has a product or service, the less satisfaction one receives from each additional unit of the product or service. For example, I love coke and whenever I crave for it, I immediately find a way to acquire three bottles. After the first bottle, I lose the crave for the second bottle as much I was the first one because I have satisfied my taste buds. Many economists agree that diminishing marginal utility does contradict the statement that consumers always want more of the same service or product because in most cases, although all goods and services are scarce, many consumers are ready to abandon scarce goods if they are all abundant.
The first property of indifference curve represents how consumers prefer more of a product than less of it, which places consumers on a higher indifference curve. The second property represents the willingness of a consumer to give one product only if they receive more of the other product in order to make the consumer satisfied. This implies reducing the quantity of one product increase the quantity of another product, and for this reason, most indifference curves slope downward. Property three of indifference curve demonstrates how the indifference curves do not cross. Property four shows that people are more willing to sell properties that they have in plenty than those goods that they have less. This property causes the indifference curve to bow inward.
Budget constrain refers to a combination of services and goods that consumers can afford with limited budget at a given price. A change in income of a consumer will make the budget constrain to shift, while change in price will make the budget constrain rotate. The consumer has the possibility of exploiting the utility by deciding on a point on his budget constraint curve lying on the highest indifference curve that is the optimum point. At this point, the slope of indifference curve equals the slope of the budget constraint curve. Consumers know if they are not maximizing utility if with additional purchase of good, their total convenience becomes depressing.
Condorcet believed that the rationale of voting was to make a choice best for a society. According to him, one choice was first best, another choice the second best, and so on. The Condorcet Voting Paradox demonstrates how the democracy voting system always fails to choose the outcome that the society really wants. In his conclusion, he said collective systems recur independently of the choices of the individual voters. His Idea is a paradox since the majority wishes are always in conflict because it is made up of varied groups of individuals.
Arrow’s Impossible Theorem proved that when there are three or more candidates for example, in a voting there is no voting system that satisfies all four of the axioms (transitivity, unanimity, independence of irrelevant alternatives, and no dictators). This implies that a voting system cannot convert the ranked preferences of individuals into a community-wide ranking while meeting a set of criteria when they have three or more options to choose.
According to the law of demand, when prices of goods change, the quantities of the good a consumer is wills to buy changes in the opposite direction. This means that rises in prices of a commodity consequently reduces the purchasing power of the customer’s budget. Even though the budget of the consumers has not changed, the prices increase makes it appear as if their budget has decreased, just like a decrease in the consumers’ earnings. The manner in which a consumer responds to this alteration to purchasing power is referred to as the income effect. Substitution effects is when the consumer takes into account the new relative prices and switches goods to enable him or her jeep the overall level of satisfaction unchanged. The reason for maximizing utility is to achieve the highest level of utility from the consumption of services and goods.