Chapter 12

Question 1

Flow

Answer 1

Amount per unit of time

Question 2

Stock

Answer 2

Fixed amount at a moment in time

Question 3

Important concepts determining each income

Answer 3

Labour - marginal revenue product

Capital - present value

Land - economic rent

Question 4

Derived demand

Answer 4

Demand for oily and profits business can derive from being labour

Question 5

Marginal product

Answer 5

Additional output from hiring one more unit of labour

Question 6

Diminishing marginal productivity

Answer 6

As you add more of a variable input to fixed inputs, the marginal product of the variable input eventually diminishes

Question 7

Marginal revenue product

Answer 7

Additional revenue from sling output produced by additional labourer

Question 8

Present value

Answer 8

Amount if invested today will grow as large as the future amount, taking account of earned interest

Question 9

Present value formula

Answer 9

Amount of money available in n years

\ (1 + interest rate)^n

Question 10

Discount

Answer 10

Reduction of future revenues for forgone interest

Question 11

Economic rent

Answer 11

Income paid to any input in relatively inelastic supply

Question 12

How to improve human capital

Answer 12

Education and training

Treats underlying cause of poverty