Unit 5 - Factor Markets

physical capital

manufactured goods like tools, machines, equipment

derived demand

demand from demand of output being produced

marginal revenue product curve

shows how MR of product of a factor depends on the quantity of the factor employed

leisure

time available for purposes other than earning money to buy marketed goods and services

marginal factor cost

additional cost of employing an additional unit of a factor of production

economic rent

payment to a factor of production that exceeds the minimum amount necessary to keep it in its current use

human capital

improvement in labor by education and knowledge in the workforce

marginal revenue product

additional revenue by employing one more unit of that factor

rental rate

cost, explicit or implicit, of using a unit of that asset for a given period of time

individual labor supply curve

shows how quantity of labor supplied by an individual depends on the wage rate

equilibrium marginal revenue product

additional revenue from last unit of that factor employed in the factor market as whole

cost minimization rule

employ factors so that marginal product per dollar spent on each factor is the same

monopsonist

a single buyer in a factor market

monopsony

a market with a monopsonist