Lesson 26-28 Flashcards
sub-market
part of the market with unique characteristics
derived demand
where the demand for a factor of production or good derives not from the factor or good itself, but from the goods or services it provides
what does MPPl mean
marginal revenue product of labour
what does MPPl mean
the additional quantity of output produced by an additional unit of labour
what does MRP stand for?
marginal revenue product of labour
what does MRP mean?
the additional revenue received by a firm as it increases output by using an additional unit of labour input
how do you calculate MRPl
MRPl=MPPl x MR
what is the marginal revenue product theory
the demand for labour depends upon balancing the revenue that a firm gains from employing an additional unit of labout against the mc of that unit of labour
what is wage elasticity of demand
a measure of the sensitivity of quantity of labour demanded to a change in the price of wages
what is the formula for wage elasticity of demand
%change in quantity of labour demanded/ %change in wages
unit labour costs
the average cost of labour per unit of labour
what are the factors that cause a movement in the demand for labour (along the curve)
price of labour
what are the factors causing the shift in the demand for labour
change in demand for the products that are being produced, change in productivity of workers, change in the price of the product being produced, change in the cost of capital, change in an employment subsidy
factors affecting wage elasticity of demand for labour
time- demand is more elastic in the long run because you can train employees, substitutability- can the labour be substituted for capital(machinery), proportion of total costs- a small % of TC will mean more elastic demand, PED of product- the cost will be passed onto the price of the product(?)
why is there a downward sloping demand curve for labour
the law of diminishing marginal returns
