Term
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Definition
| The demand for a resource that depends on the demand for the products it helps to produce. |
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Term
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Definition
| The additional output produced when 1 additional unit of a resource is employed (the quantity of all other resources employed remaining constant); equal to the change in total product divided by the change in the quantity of a resource employed. |
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Term
| Marginal Revenue Product (MRP) |
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Definition
| The change in a firm's total revenue when it emplys 1 additional unit of a resouce (the quantity of all other rerouces emplyed remaining constant); equal to the change in total revenue divided by the change in the quantity of the resource employed. |
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Term
| Marginal Resource Cost (MRC) |
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Definition
| The amount the total cost of emplying a resource increases when a firm employs 1 additional unit of the resource (the quantity of all other resources employed remaining constant); equal to the change in the total cost of the resource divided by the change in the quantity of the resource employed. |
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Term
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Definition
| The principle that to maximize profit (or minimize losses), a firm should employ the quantity of a resource at which its marginal revenue product (MRP) is equal to its marginal resource cost (MRC), the latter being the wage rate in a purely competitive labor market. |
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Term
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Definition
| (1) A change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price; (2) the effect of a change in the price of a resource on the quantity of the resource employed by a firm, assuming no change in its output. |
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Term
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Definition
| The situation in which an increase in the price of one input will increase a firm's production costs and reduce its level of output, this reducing the demand for other inputs; conversely for a decrease in the price of the input. |
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Term
| Elasticity of Resource Demand |
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Definition
| A measure of responsiveness of firms to a change in the price of a particular resourcethey employ or use; the percentage change in the quantity of the resource demanded dividedby the percentage change in its price. |
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Term
| Least-cost Combination of Resource |
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Definition
| The quantity of each resource a firm must emply in order to produce a particular output at the lowest total cost; the combination at which the ratio of the marginal product of a resource to its marginal resource cost (to its price if the resource is employed in a competitive market) is the same for the last dollar spent on each of the resources employed. |
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Term
| Profit-Maximizing Combination of Resources |
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Definition
| The quantity of each resource a firm must employ to maximize its profit or minimize its loss; the combination in which the marginal revenue product of each resource is equal to its marginal resource cost (to its price if the resource is employed in a competitive market). |
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Term
| Marginal Productivity Theory of Income Distribution |
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Definition
| The contention that the distribution of income is equitable when each unit of each resource recieves a money payment equal to its marginal contribution to the firm's revenue (its marginal revenue product) |
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