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AQA Economics Unit 3 Chapter 7: Demand and Supply
Key definitions
15
Economics
12th Grade
05/22/2014

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Term
Derived demand
Definition
Occurs when the demand for a factor of production arises from the demand for the output it produces.
Term
Theory of marginal productivity
Definition
Key theory underpinning the demand for labour.
Term
Marginal revenue product (MRP)
Definition
The value of the physical addition to output arising from hiring one extra unit of a factor of production.
Term
Marginal product of labour
Definition
The change in total output arising from hiring one more worker.
Term
Elasticity of demand for labour
Definition
The responsiveness of quantity demanded of labour to a change in the wage rate.
Term
Economically inactive
Definition
The percentage of the population who are either not in work or not seeking it.
Term
Participation rate/activity rate
Definition
The percentage of the population of working age currently in work or actively seeking work.
Term
Monetary factors
Definition
The financial rewards to a particular occupation, for example wage, commision or bonus.
Term
Non-monetary factors
Definition
The non-financial rewards to a particular occupation, for example holidays, leisure time and convenience.
Term
Net advantage
Definition
The overall rewards to a particular occupation, taking into account both monetary and non-monetary factors.
Term
Unemployment
Definition
The number of people of working age who do not currently have a job but are actively seeking work at existing wage rates.
Term
Elasticity of supply of labour
Definition
The responsiveness of quantity of labour supplied to a change in wage rate.
Term
Backward-bending supply curve for labour
Definition
The individual labour supply curve is thought to be this shape because it is assumed workers will prefer to work fewer hours as their income increases above a certain level.
Term
Income effect (of a wage increase)
Definition
Depending upon an individual's target level of income, he or she can work fewer hours for the same overall pay.
Term
Substitution effect (of a wage increase)
Definition
Individuals will tend to choose to work more hours, as the opportunity cost of leisure increases.
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