Chapter 18 wasn’t too difficult, but it introduced a lot of
new concepts and added onto old chapters. The chapter largely focused on labor,
both the demand and supply, but also briefly talked about land and capital, and
how a shift in one factor of production will affect the others. The markets
were seen as competitive, so it focused on a lot of the earlier stuff, which
made it easier to understand, but it is very dense. Most of the ways to read
the labor market was through its marginal values, such as knowing that
profit-maximizing firms hire each factor up to the point at which the value of
the marginal product of the factor equals its price, and factor demand reflects
the value of the marginal product of that product. In equilibrium, each factor
is compensated according to its marginal contribution to the production of
goods and services.
