Chapter 10 - Input Demand: The Labor and Land Markets Flashcards
derived demand
The demand for resources (inputs) that is dependent on the demand for the outputs those resources can be used to produce.
productivity of an input
The amount of output produced per unit of that input.
marginal product of labor (MP(subL))
The additional output produced by 1 additional unit of labor.
marginal revenue product (MRP)
The additional revenue a firm earns by employing 1 additional unit of input, ceteris paribus.
factor substitution
effect
The tendency of firms to substitute away from a factor whose price has risen and toward a factor whose price has fallen.
output effect of a factor price increase (decrease)
When a firm decreases (increases) its output in response to a factor price increase (decrease), this decreases (increases) its demand for all factors.
demand-determined
price
The price of a good that is in fixed supply; it is determined exclusively by what households and firms are willing to pay for the good.
pure rent
The return to any factor of production that is in fixed supply.
technological change
The introduction of new methods of production or new products intended to increase the productivity of existing inputs or to raise marginal products.