APMicro Unit 5 Vocab

Capital

Man-made resources such as tools, machinery, and equipment used to produce goods and services.

Compensating Differentials

 Differences in wages that reflect the nonmonetary characteristics of jobs, such as risk, working conditions, or required skill level.

Economic Rent

The payment to a factor of production in excess of the minimum amount necessary to keep it employed in its current use.

Factor Market

A market in which households sell resources such as labor, land, and capital to firms.

Human Capital

The skills, education, training, and experience that increase a worker’s productivity and earning potential.

Income Distribution

The way total income is divided among individuals or groups in an economy.

Labor Demand Curve

A downward-sloping curve showing the relationship between the wage rate and the quantity of labor demanded by firms, based on marginal revenue product.

Labor Market

The market in which labor services are bought by firms and sold by workers.

Labor Supply Curve

An upward-sloping curve showing the relationship between the wage rate and the quantity of labor supplied by workers.

Labor Union

An organization of workers that seeks to improve wages, working conditions, and benefits through collective bargaining.

Land Rent

The income earned from the use of natural resources.

Marginal Factor Cost (MFC)

The additional cost to a firm of hiring one more unit of a factor of production.

Marginal Product of Labor (MPL)

The additional output produced by employing one more unit of labor.

Marginal Revenue Product (MRP)

The additional revenue generated from employing one more unit of a factor of production, calculated as MPL multiplied by the price of output.

Minimum Wage

A legally established price floor on wages, set by the government, which can lead to a surplus of labor if above equilibrium.

Monopsony

A market structure in which there is a single buyer of labor, giving the employer significant control over wages and employment.

Wage Determination

The process by which wages are set in a labor market, typically at the intersection of labor supply and labor demand.