MRP and elastic demand for a resource mobility, question, elastic, correct, example

sweetgirl

Having a bit of trouble grasping the concept from this question. Can someone give me a real world example for each side of this?


The steeper a firm’s marginal revenue product curve for a given resource, the

A) more elastic the firm's demand curve for the resource.

B) less elastic the firm's demand curve for the resource.

C) lower the mobility of the resource.


Your answer: A was incorrect. The correct answer was B) less elastic the firm's demand curve for the resource.

The marginal revenue product curve of a resource for a given firm will directly determine the firm's demand curve for the resource. If the marginal revenue curve for a resource is steep, then the demand curve for the resource will be steep. Resource mobility is not determined by its MRP.

ftwcfa

MRP is additional revenue to the firm from additional output produced by employing and additional resource (e.g. labor).

As beatthecfa said, 'The MRP curve is the demand curve for a resource'.

Now, why MRP curve could be taken as demand curve for that resource?

This is because, firm will keep on employing additional labor till the price (wage) of employing that additional labor equals MRP from that labor. Thus MRP curve becomes demand curve of that resource for the firm.

mnieman

the answer is pretty straight forward,
we know that
marginal revenue is the change in total revenue that is generated by an additional unit of sale.

if the change is positive demand is elastic, if negative demand is inelastic.