factor market - shows how much the firm demands units of labor (or other factor)  

• combines utility, isoquants, and market
• marginal revenue product of labor (MPR_L) - additional revenue from the extra output that would result from hiring another unit of labor
  • MPR_L = (MR)(MP_L)
  • in competitive market, MR=P >> MPR_L = (P)(MP_L)
  • will hire more if extra revenue exceeds the cost
  • cost = wage = w >> usually constant

• cost function
• MPR_L
• lower cost >> wage shift >> increased demand in labor