Labor Markets and Factor Markets Concepts

These flashcards cover the essential vocabulary and concepts related to labor markets and factor markets, including definitions of key terms and important laws.

Land

All natural resources that are used to produce goods and services.

Labor

Any effort a person devotes to a task for which that person is paid.

Capital

Human-made resources used to create goods and services; includes physical and human capital.

Entrepreneurship

Ambitious leaders that combine the other factors of production to create goods and services.

Factor Payments

Payments made for the use of the factors of production, such as rent, wages, interest, and profit.

Labor Market

The market where businesses pay individuals for their labor.

Demand for Labor

The different quantities of workers that businesses are willing and able to hire at different wages.

Inverse Relationship

In labor markets, as wages increase, the quantity of labor demanded decreases.

Supply of Labor

The different quantities of individuals willing and able to sell their labor at different wages.

Direct Relationship

In labor markets, as wages increase, the quantity of labor supplied increases.

Minimum Wage

A price floor that makes it illegal for employers to pay employees less than a specified hourly rate.

Fair Labor Standards Act

A U.S. labor law that establishes minimum wage and overtime pay standards.

Derived Demand

The demand for labor that is dependent on the demand for the products that labor produces.

Marginal Resource Cost (MRC)

The additional cost of hiring one more worker.

Marginal Revenue Product (MRP)

The additional revenue generated by hiring one more worker.

Monopsony

A labor market where there is only one major employer.

Profit Maximization Rule

In a competitive market, the price of the resource must equal its marginal revenue product.

Wage Differentials

Differences in wages that occur due to varying supply and demand conditions in different occupations.

Wage Discrimination

When workers with similar economic characteristics are paid different amounts due to factors like race or gender.