Chapter 16: Factors of Production Flashcards
factors of production
the ingredients that go into making a good or service
how does factors of production contribute to output
land, labor, capital
derived demand
demand for factors of production
marginal product
the increase in output that is generated by an additional unit of input
equilibrium
demand curve intersects the supply curve
human capital
the set of skills, knowledge, experience, and talent that determine the productivity of workers
human capital the importance in the labor market
it determines the productivity of workers
rental price
the price paid to use a factor of production for a certain period or task
purchase price
the price paid to gain permanent ownership of a factor of production
two reasons why a wage might rise above the market equilibrium and describe their effect on the labor market.
1.) minimum wages
2.) efficiency wages
minimum wage is a price floor that causes excess workers and unemployment
efficiency wage is an above-market wage that an employer pays its employees to increase productivity
marginal product of labor (MPL)
ex: change in tomatoes produced/ # of workers
value of marginal product of labor (VMPL)
MPL x Price
if it increases MPL shifts
right
if it decreases MPL shifts
left
