19.3 Capital and Natural Resource Markets

MyEconLab Concept Video

The markets for capital and land can be understood by using the same basic ideas that you’ve seen when studying markets for labor. But markets for nonrenewable natural resources are different. We’ll now examine three groups of factor markets:

  • Capital markets

  • Land markets

  • Nonrenewable natural resource markets

Capital Markets

The demand for capital is based on the value of marginal product of capital. Profit-maximizing firms hire the quantity of capital at which the value of marginal product of capital equals the rental rate of capital. The lower the rental rate, other things remaining the same, the greater is the quantity of capital demanded. The supply of capital responds ...

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