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12.7: Key Terms

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    108441

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    Demand for labour: a derived demand, reflecting the demand for the output of final goods and services.

    Value of the marginal product is the marginal product multiplied by the price of the good produced.

    Marginal revenue product of labour is the additional revenue generated by hiring one more unit of labour where the marginal revenue declines.

    Monopsonist is the sole buyer of a good or service and faces an upward-sloping supply curve.

    Participation rate: the fraction of the population in the working age group that joins the labour force.

    The labour force is that part of the population either employed or seeking employment.

    Unemployment rate: the fraction of the labour force actively seeking employment that is not employed.

    Transfer earnings are the amount that an individual can earn in the next highest paying alternative job.

    Rent is the excess remuneration an individual currently receives above the next best alternative. This alternative is the reservation wage.

    Physical capital is the stock of produced goods that are inputs to the production of other goods and services.

    Gross investment is the production of new capital goods and the improvement of existing capital goods.

    Net investment is gross investment minus depreciation of the existing capital stock.

    Depreciation is the annual change in the value of a physical asset.

    Stock is the quantity of an asset at a point in time.

    Flow is the stream of services an asset provides during a period of time.

    Capital services are the production inputs generated by capital assets.

    Rental rate: the cost of using capital services.

    Asset price: the financial sum for which the asset can be purchased.

    Present value of a stream of future earnings: the sum of each year's earnings divided by one plus the interest rate raised to the appropriate power.

    Marginal product of capital is the output produced by one additional unit of capital services, with all other inputs being held constant.

    Value of the marginal product of capital is the marginal product of capital multiplied by the price of the output it produces.

    Required rental covers the sum of maintenance, depreciation and interest costs.

    This page titled 12.7: Key Terms is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.