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FACTOR DEMAND AND MARGINAL REVENUE PRODUCT: For a firm that hires the services of a factor in a perfectly competitive factor market, the factor demand curve is that portion of the marginal revenue product curve that lies below the average revenue product curve. The relation between marginal revenue product and factor demand for a perfectly competitive firm is comparable to the relation between marginal cost and short-run supply. A perfectly competitive firm maximizes profit by hiring the quantity of a factor that equates factor price and marginal revenue product. As such, the firm moves along it's marginal revenue product curve in response to alternative factor prices.
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INVESTMENT, PRODUCTION POSSIBILITIES Investment typically refers to the purchase of productive capital by business in anticipation of increasing production and (presumably) generating more profit. More generally, investment can be considered as sacrificing the current satisfaction of wants and needs (consumption goods) to expand productive capability (capital goods). Production possibilities analysis can be used to illustrate the tradeoff between consumption and capital as a movement along a production possibilities curve.
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GRAY SKITTERY
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Today, you are likely to spend a great deal of time strolling through a department store hoping to buy either throw pillows for your bed or a package of blank rewritable CDs. Be on the lookout for small children selling products door-to-door.
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
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"Use, do not abuse; neither abstinence nor excess ever renders man happy." -- Voltaire, philosopher
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EER
European Economic Review
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