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Physical Capital
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Definition:often referred to as simply capital; consists of manufactured resources such as buildings and machines
Connection: An example of physical capital when making apple pies would be the oven, as that is part of the equipment used to make the apple pies.
Connection: An example of physical capital when making apple pies would be the oven, as that is part of the equipment used to make the apple pies.
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Human Capital
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Definition: the improvement in labor created by education and knowledge that is embodied in the workforce
Connection: An example of human capital would be a college educated teacher, who is able to get a job teaching that an accountant wouldn't be able to get
Connection: An example of human capital would be a college educated teacher, who is able to get a job teaching that an accountant wouldn't be able to get
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Factor Distribution of Income
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Definition: the division of total income among labor, land, and capital
Connection: In the United States, in 2004, 71% of the income in the US was given to compensation of employees.
Connection: In the United States, in 2004, 71% of the income in the US was given to compensation of employees.
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Value of Marginal Product
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Definition: the value of the additional output generated by employing one more unit of that labor
Connection: The value of the marginal product can be found by multiplying the unit price that is charged to consumers by the good and the marginal product of the good.
Connection: The value of the marginal product can be found by multiplying the unit price that is charged to consumers by the good and the marginal product of the good.
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Value of the Marginal Product Curve
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Definition: shows how the value of the marginal product of that factor depends on the quantity of the factor employed
Connection:
Connection:
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Rental Rate
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Definition: cost, implicit or explicit, of using a unit of that asset for a given period of time
Connection: If you are opening a small business, the monthly payment that you pay the land lord of the building you are located in is considered your rental fee.
Connection: If you are opening a small business, the monthly payment that you pay the land lord of the building you are located in is considered your rental fee.
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Equilibrium Value of the Marginal Product
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Definition: the additional value produced by the last unit of that factor employed in the factor market as a whole
Connection: This is where the equilibrium number of workers intersects with the value of the marginal product of labor. This means that workers are paid the value of marginal product, which is the value of the marginal product of the last worker hired in the labor market.
Connection: This is where the equilibrium number of workers intersects with the value of the marginal product of labor. This means that workers are paid the value of marginal product, which is the value of the marginal product of the last worker hired in the labor market.
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Marginal Productivity Theory of Income Distribution
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Definition: every factor of production is paid its equilibrium value of the marginal product
Connection: An example of this would the gender wage gap that is currently found within the US. This can be found not only between men and women and the different pay that they both receive for completing the same job, but also the different pay that people of different races receive for completing the same job.
Connection: An example of this would the gender wage gap that is currently found within the US. This can be found not only between men and women and the different pay that they both receive for completing the same job, but also the different pay that people of different races receive for completing the same job.
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Compensating Differentials
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Definition: wage differences across jobs that reflect the fact that some jobs are less pleasant than others
Connection: An example of this would be Bill Gates getting paid more than Dr. Forbes would. This isn't because Bill Gates is more talented than Dr. Forbes, but rather because he has a greater amount of market power than she does.
Connection: An example of this would be Bill Gates getting paid more than Dr. Forbes would. This isn't because Bill Gates is more talented than Dr. Forbes, but rather because he has a greater amount of market power than she does.
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Unions
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Definition: organizations of workers that try to raise wages and improve working conditions for their members
Connection: An example of a union would be a teacher union. They make sure that teachers are able to get the amount of money, sick days, and other benefits that they feel are fair.
Connection: An example of a union would be a teacher union. They make sure that teachers are able to get the amount of money, sick days, and other benefits that they feel are fair.
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Efficiency Wage Model
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Definition: some employers pay above equilibrium wages as an incentive for better performance
Connection: An example of this would be one business offering someone $40,000 per year compared to another business that offered someone $35,000. While the jobs may seem very similar, one may offer more money because the city in which it is located may have a higher cost of living than the other cities.
Connection: An example of this would be one business offering someone $40,000 per year compared to another business that offered someone $35,000. While the jobs may seem very similar, one may offer more money because the city in which it is located may have a higher cost of living than the other cities.
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Time Allocation
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Definition: decisions about labor supply result from decisions about this; how many hours to spend on different activities
Connection: This is similar to opportunity cost in a way as you have to make the decision as to what is better for you, where your options are working or leisure.
Connection: This is similar to opportunity cost in a way as you have to make the decision as to what is better for you, where your options are working or leisure.
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Leisure
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Definition: time available for purposes other than earning money to buy marketed goods
Connection: Leisure is any time spent not working according to an economist. This could mean that someone is sleeping, eating, watching TV, or getting their nails done.
Connection: Leisure is any time spent not working according to an economist. This could mean that someone is sleeping, eating, watching TV, or getting their nails done.
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Individual Labor Supply Curve
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Definition: shows how the quantity of labor supplied by an individual depends on that individual's wage rate.
Connection: An example of this would be for Karen. On this supply curve, it would be displayed that at a wage rate of $50, Karen is willing to work for 3 hours compared to at a wage rate of $100, where she would be willing to work 4 hours, assuming the substitution effect dominates in this case.
Connection: An example of this would be for Karen. On this supply curve, it would be displayed that at a wage rate of $50, Karen is willing to work for 3 hours compared to at a wage rate of $100, where she would be willing to work 4 hours, assuming the substitution effect dominates in this case.
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