derived demand – Flashcards

Business demand that ultimately comes from (derives from) the demand for consumer goods.

The increase in output that arises from an additional unit of input

The addition to total revenue from selling the additional output from employing one more unit of a productive resource(input)

the change in total cost when an additional unit of a resource is hired, other things constant.

A firm will purchase more of an input whose relative price has declined and, conversely, use less of an input whose relative price has increased

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.

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, thus reducing the demand for other inputs; conversely for a decrease in the price of the input.

A measure of the responsiveness of firms to a change in the price of a particular resource they employ or use; the percentage change in the quantity of the resource demanded divided by the percentage change in its price.

The quantity of each resource a firm must employ in order to produce a particular output at the lowest total cost; the combination at which the the ratio of the marginal product of a resource to its marginal resource cost is the same for the last dollar spent on each of the resources employed.

The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity