Terms in this set (29)
The addition to purchasing power that can be gained from working an extra hour, and vice versa, for working one less hour
The addition to leisure time that can be gained from working one less hour, and vice versa for working an additional hour
The real goods and services that money can buy; determines the value of money
The price of labor, and this is the prevailing pay scale for work performed in an occupation in a given area or region
The factor market in which workers find paying work (labor supply), employers find willing workers (labor demand), and wage rates are determined.
Supply of labor
The amount of time an individual is willing to work at various wage rates
Demand for labor
The quantities of labor employers are willing and able to hire at alternative wage rates in a given time period
Substitution effect of a wage increase
A higher wage encourages more work because other activities (i.e., leisure) now have a higher opportunity cost
Income effect of a wage increase
A higher wage increases a worker's income, increasing the demand for all goods, including leisure, so that the quantity of labor supplied to market work decreases
Equilibrium wage rate
The wage rate leaving neither a surplus nor a shortage of workers in the market
Equilibrium employment level
The number of workers employed in a labor market where the supply of labor is equal to the demand for labor
The opportunity cost of working is giving up leisure, and the opportunity cost of leisure is giving up goods and services that earnings from work purchase
The quantity of output per unit of capital (e.g., per industrial machine) over a given time period.
Is demand for a factor of production that occurs as a result of the demand for another good. In essence, the demand for a factor of production by a firm is dependent on the demand by consumers for the product produced by the firm.
Diminishing marginal returns to labor
The increase in total output that arises from an additional unit of input is less than the increase in output associated with the previous unit of input. For example, each additional worker that is added to the production process increases output by less than the previous worker did.
Entrepreneur's demand for scarce factors of production used by businesses, such as natural resources, human resources, and capital resources; this is derived demand.
Factor of production
Any resource used in the productive process of producing goods and services; these are land, labor, capital, and enterprise.
Payments made for the use of the factors of production: land = rent, labor = wages, capital = interest, enterprise = profits.
Additional benefits received when one more unit of a product is produced. This is the value of the output (e.g., number of cakes) that results when an additional unit of labor (e.g., one more baker) is employed.
The addition to a firm's total costs of production when one more unit of a good is produced; i.e., the additional cost to a firm of purchasing a unit of labor so that output (e.g., number of cakes) can be increased.
A factor market with only one buyer; for example a company coal town, where the coal company acts the sole employer and therefore the sole purchaser of labor in the town
A single buyer in a factor market; for example a company coal town, where the coal company acts the sole employer and therefore the sole purchaser of labor in the town
Marginal product of labor
The increase in total output that arises from an additional unit of labor being employed.
Marginal factor cost of labor
The additional cost of hiring an additional worker (equal to the supply curve in labor markets).
Marginal revenue product of labor
The change in total revenue due to a one-unit increase in labor input, holding other inputs fixed
Maximizing profit when employing labor
The firm chooses the level of labor at which the value of the marginal product of labor is equal to the marginal factor cost of labor.
The value of the marginal product curve of labor is the producer's individual demand curve for labor.
Quantity of output per unit of input; e.g., the productivity of labor (number of cakes produced per hour).
Total output produced by a firm.
Value of the marginal product of labor
The extra value ($) of output generated by employing one more unit of labor.