 | Economics 14/e McConnell | |||||
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| Economics 14/e McConnell | |||||
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| Online Learning Center | | |||||
derived demand
The demand for a resource which depends on the demand for the products it can be used to produce.
marginal product
The additional output produced when one additional unit of a resource is employed (the quantity of all other resources employed remaining constant); equal to the change in total product divided by the change in the quantity of a resource employed.
marginal revenue product
The change in a firm’s total revenue when it employs one additional unit of a resource (the quantity of all other resources employed remaining constant); equal to the change in total revenue divided by the change in the quantity of the resource employed.
marginal resource cost
The amount the total cost of employing a resource increases when a firm employs one additional unit of the resource (the quantity of all other resource employed remaining constant); equal to the change in the total cost of the resource divided by the change in the quantity of the resource employed.
MRP 5 MRC rule
To maximize profit (or minimize losses) a firm should employ that quantity of a resource at which its marginal revenue product (MRP) is equal to its marginal resource cost (MRC) the latter being the wage rate in pure competition.
substitution effect
(1) A change in the price of a consumer good changes the relative expensiveness of that good and hence changes the consumer’s willingness to buy it rather than other goods. (2) The effect of a change in the price of a resource on the quantity of the resource employed by a firm assuming no change in its output.
output effect
An increase in the price of one input will increase a firm’s production costs and reduce its level of output thus reducing the demand for other inputs; conversely for a decrease in the price of the input.
elasticity of resource demand
The measurement of the sensitivity of producers to changes in resource prices. It is measured as the percentage change in resource quantity divided by the percentage change in resource price.
demand
A schedule showing the amounts of a good or service buyers (or a buyer) wish to purchase at various prices during some time period.
least-cost combination of resources
The quantity of each resource a firm must employ in order to produce a particular output at the lowest total cost; the combination at which the ratio of the marginal product of a resource to its marginal resource cost (to its price if the resource is employed in a competitive market) is the same for the last dollar spent on each resource employed.
profit-maximizing combination of resources
The quantity of each resource a firm must employ to maximize its profit or minimize its loss; the combination in which the marginal revenue product of each resource is equal to its marginal resource cost (to its price if the resource is employed in a competitive market).
marginal productivity theory of income distribution
The contention that the distribution of income is equitable when each unit of each resource receives a money payment equal to its marginal contribution to the firm’s revenue (its marginal revenue product).
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