Chapter 18

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.