Significance of Resource Pricing

Tags:  

Money-income determination
  • Resource prices = major determinant of household income
  • Expenditures (for firms): wages, rent, interest, profit income = income for households
Cost-minimization
  • Resource prices are costs (for firms)
  • Firms must maximize profit at level of output w/ least costly combination of resources
  • Cost = main determinant of quantity of land, labor, capital and entrepreneurial talent employed in production
Resource allocation
  • Allocate resources among firms and industries
  • Produce shift of resources from use to another
Policy issues
  • The resource market can determine what kind of policy the government makes
  • Debated issues:
    • Redistribution of income through taxes + transfers
    • Discouragement of “excess” pay to corporate executives
    • Increase in legal min. wage, subsides
    • Labor unions

 

0 Comments  Show recent to old
Post a comment


 RSS of this page