Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ECON 101 > Section 12 > Flashcards

Section 12 Flashcards

You may prefer our related Brainscape-certified flashcards:
Physics 101 flashcards Psychology 101 flashcards Chemistry 101 flashcards Biology 101 flashcards Organic Chemistry 101 flashcards Sociology 101 flashcards
1
Q

Derived Demand

A

The demand for an input or resource is derived from the demand for the good or service that uses the resource.

If the demand for an end product increases, then the demand for the materials will increase.

Downward sloping due to diminishing returns, not for the same reasons as downward slopping demands for consumer goods.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Marginal Revenue Product (MRP)

A

Additional revenue generated from using one more unit of the input.

Change in total revenue divided by the change in the number of inputs.
OR
Marginal product times marginal revenue.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Marginal Resource Cost (MRC)

A

Additional cost incurred by employing one more unit of the input.

Change in total cost divided by the change in the number of inputs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Optimal Number of Workers

A

Where MRP = MRC

If MRP is greater then or equal to the MRC then we should employ more resources. If MRP is less then MRC then we should employ fewer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Human Capital

A

Education, skills, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Deriving Demand for Price Takers (competitive)

A

Market price is equal to marginal revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Deriving Demand for Price Makers

A

Market price is is not equal to marginal revenue. Marginal revenue is less then price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Monopsony

A

One buyer in the market. Wage-setter.

Marginal resource costs are greater than the supply curve. Wages are less then a perfectly competitive wage rate.

Marginal resource cost is higher then supply curve, because when you raise the pay for one, you have to do it for everyone.

Employees where marginal revenue product is equal to marginal resource cost.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Cost Minimization

A

AKA - Least-cost Rule

Select the best ratio of marginal utilities per dollar. Select either labor or capital that is the highest until you reach the quantity desired.

Happens when the isoquant curve is tangent to the isocost curve. MU(x) / MU(y) = P(x) / P(y)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Profit Maximization

A

Output level is determined by dividing MRP by MRC while the results are 1.0 or higher. Anything below 1 should not be produced.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Backward Bending Supply Curve

A

The supply curve will increase with salary, and then at a certain point it will start to decrease with salary.

Labor is an inferior good. Leisure is a normal good.

At lower wages workers subsitute leisure for labor and work more.

At higher wages when income effect is greater then the substitution effect workers are less willing to work and want leisure activity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Substitution Effect

A

Leads workers to supply more labor and have less leisure since the opportunity cost of leisure has increased.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Income Effect

A

If it is negative then they will reduce the quantity of labor supplied as wages increase.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Labor Union

A

Seek to exercise their market power and demand higher wages, better working conditions, or other benefits.

To get higher wages unions will either increase demands for labor or decrease supply of labor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Increase Demand for Labor

A
  1. Increase price of alternative resources: lobbying to increase minimum wage or restrict capital use at the company.
  2. Increase productivity through training
  3. Pay for product advertising to increase demand for product
  4. Politics to increase demand for labor by requiring union employees only.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Restrict Supply of Labor

A
  1. Laws to restrict age a person is eligible to work, or number of hours to work.
  2. Requiring licenses in order to work
17
Q

National labor Relations Act of 1935 - Wagner Act

A

Employers were forced to accept unions.

18
Q

Taft-Hartley Act

A

Outlawed “closed shops” which forced firms to hire only union members and allowed right-to-work laws.

19
Q

Minimum Wage

A

A price floor where the rate is raised above the market equilibrium quantity.

Creates a surplus of labor. Forces firms to lay off workers when the marginal revenue product is less than the marginal resource cost.

20
Q

Efficiency Wage

A

Pay a wage rate higher than the going market wage rate. Encourages workers to work hard, increase moral, and productivity. Reduces turnover and increases pool of candidates.

21
Q

Piece-rate Pay

A

Paid based on what they produce. Those will higher marginal revenue product are rewarded for their production. Encourages them to work harder, but can affect quality.

22
Q

Compensating Differential

A

Compensate individuals in occupations that are relatively more unpleasant or risky.

23
Q

Ways to Differentiate Yourself

A
  1. Major / knowledge
  2. Skills
  3. Values
  4. Experiences
24
Q

Isoquants

A

Curve that shows the different combinations of labor and capital that yield the same quantity, independent of the price of the resource. Similar to the budget line.

25
Q

Marginal Rate of Technical Substitution (MRTS)

A

Slope of the curve and measures the rate at which labor can be substituted for capital while producing the same quantity.

MRTS - MP(l) / MP(k)

26
Q

Isocost Curve

A

Combinations of the capital and labor that have the same cost. Similar to the indifference curve.

Divide total cost by the price of the resource. Cost increase pushes the curve right, and a decrease pushes it left.

27
Q

Determinants of Resource Demand

A
  1. Changes in product demand
  2. Changes in productivity (quantity of other resources, technological advances, quality of variable resources)
  3. Changes in price of other resources (substitute resources, complementary resources)
28
Q

Substitute Resources

A
  1. Substitution Effect: Decreases the demand for labor, as the price of machines declines they will substitute labor.
  2. Output Effect: With lower costs of machines the company finds it profitable to product more output, increasing the demand for all resources.
  3. Net Effect: Substitution effect decreases the demand for labor and the output effect increases it, net result being the same.
29
Q

Complementary Resources

A

Increase in the quantity of one resources demands the increase of the other (one uses the other).

ECON 101 (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions