Vocabulary: Unit Six Flashcards
Derived factor demand
The demand for a factor of production that’s dependent on the consumer demand for the good or service made with that factor
Marginal physical product
MPP; the change in total output with the addition of one more resource
Marginal revenue product
MRP; the change in total revenue with the addition of one more resource
Marginal resource cost
The cost of employing an additional unit of input
Price elasticity of resource demand
Measures the firm’s responsiveness to changes in the price of the factor
Least-cost method
A firm buys resources until the marginal physical product per dollar spent on each factor is the same
Maximum-profit method
The price of a resource equals its marginal revenue product
Wages
An hourly rate for labor
Salary
Weekly, monthly, or annual income
Earnings
Total compensation; includes a wage or salary and other things like a sales commission, stock options, and health and retirement benefits
Competitive labor market
Many laborers compete for a job so no one laborer can influence the wage
Minimum wage
The legal minimum employers must pay in wages; creates a price floor resulting in a surplus of workers
Monopsony
A market with only one large employer
Bilateral monopoly
The sole buyer of a good or service bargains with the sole seller of the good or service
Economic rent
The amount of payment a resource earns above its opportunity cos; income resource owners earn above opportunity cost
