Demand and supply

derived demand
occurs when the demand for a factor of production arises from the demand for the output it produces
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theory of marginal productivity
key theory underpinning the demand for labour
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the value of the physical addition to output arising from hiring one extra unit of a factor of production.
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marginal product of labour
the change in total output arising from hiring one more worker
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economically inactive
the % of the population who are either not in work nor seeking it.
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monetary factors
the financial rewards to a particular occupation, e.g. wage, commission, bonus.
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non-monetary factors
the non financial rewards to a particular occupation e.g. holidays, leisure time and convenience
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Net advantage
the overall rewards to a particular occupation, taking into account both monetary and non-monetary factors
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Backward-bending supply curve for labour
the individual labour supply curve is
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Income effect (of a wage increase)
depending upon an individuals target level of income, he/ she can work fewer hours for the same overall pay
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substitution effect (of a wage increase)
individuals will tend to choose to work more hours, as the opportunity cost of leisure increases
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economic rent
the payment received by a factor or production over and above that which is needed to keep it in its present occupation
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transfer earnings
the min. payment needed to keep a factor of production in its present use
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trade union
an organisation of workers who join together to further their own interests
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trade union mark-up
the addition to wages secured by members of a trade union, compared to what they would earn if there were no union
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a single, dominant buyer
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wage differentials
differences in wages arising between individuals, occupations, industries, firms and regions
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where groups of workers are treated differently to other workers in the same job regarding pay and employment.
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labour market failure
where the free market fails to achieve an efficient allocation of resources in the labour market
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negative discrimination
when a group of workers is treated less favourably than others
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positive discrimination
when a group of worker's are treated more favourably than others
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a stock of valuable assets
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marketable wealth
wealth that can be transferred to others
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non-marketable wealth
wealth specific to a person, which cannot be transferred
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distribution of wealth
how wealth is shared out between the population
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a flow of money to a factor of production.
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distribution of income
how income is shared out between the factors of production
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Lorenz curve
a diagrammatic respresentation of the distribution of income and wealth
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gini coefficient
a statistical measure of the degree of inequality of income or wealth
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Absolute poverty
when an individual or household's income is insufficient for them to afford basic shelter, food and clothing.
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Relative poverty
when people are poor in comparison to others
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poverty audit
assessment of the govt.s performance in eradicating poverty.
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a statutory min. wage introduced to boost the earnings of the low paid.
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productive inefficiency
where firms are not producing at minimum possible average total cost
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allocative inefficiency
when resources are not used to produce the g/s wanted by consumers
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govt. failure
when govt. intervention to correct market failure does not improve the misallocation of resources or leads to a worsening of the situation
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negative externalities
negative spillover effects to third parties not involved with the consumption/ production of the good. Social costs > private costs
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'Tragedy of commons'
the over-exploitation of natural resources that are not owned by single individuals or organisations
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pollution permit
a right to emit a given volume of waste or pollution into the environment
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Kyoto Protocol
an agreement made at a global summit meeting in Kyoto, Japan, to cut world carbon emissions
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an investment appraisal technique that takes into account all the private and external costs and benefits of an economic decision
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shadow price
a price calculated to more accurately reflect the costs and benefits to society of a good, particularly where no market price has previously been calculated
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Other cards in this set

Card 2


theory of marginal productivity


key theory underpinning the demand for labour

Card 3




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Card 4


marginal product of labour


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Card 5


economically inactive


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