quiz 7 - derived demand

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9 Terms

1
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derived demand

the demand for a commodity or service, such as labor

2
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MRP equation

MPP x MR

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Marginal Revenue Product (MRP)

change in total production output from adding 1 more unit of input based on the new revenue it generates

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Marginal Factor Cost (MFC)

the cost for adding each additional unit of input

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MRP equation in pure competition

MPP x P (price=MR)

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causes of shifts in factor demand

1) change in demand for final product

2) change in productivity of the resources

3) change in the price of a substitute resource

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what happens when a resource becomes more productive?

the MRP curve shifts OUT

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Least Cost Rule

the condition where input cost is minimized when the ratio of marginal revenue product to price is equal for each factor of production (labor, capital etc)

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least cost rule equation

MRP1/P1=MRP2/P2=MRP3/P3…