Factor Markets and Labor Market Concepts

These flashcards cover key vocabulary and concepts related to factor markets, particularly focusing on the labor market as discussed in the lecture notes.

Marginal Revenue Product (MRP)

The additional revenue generated by employing an additional factor unit.

Derived Demand

Demand that is the result of the demand for products that the factors go to produce.

Value Marginal Product (VMP)

The price of a good multiplied by the marginal physical product of the factor.

Marginal Factor Cost (MFC)

The price of a good multiplied by the marginal physical product of the factor, indicating the cost of using one more unit of a factor.

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the market.

Elasticity of Demand for Labor

The responsiveness of the quantity demanded of labor to a change in wage rates.

Factor Price Taker

A firm that can buy all of a factor it wants at the equilibrium price, facing a perfectly elastic supply curve.

Least-Cost Rule

A rule that specifies the combination of factors that minimizes costs, requiring that the ratio of marginal physical product to price is equal across all factors.

Labor Supply

The total supply of workers available for a given job or labor market, influenced by wage rates and other factors.

Shifts in Factor Demand Curve

Changes in the demand for factors due to variations in the price of products or productivity of factors.