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 LINE GRAPH: A graph containing one or more lines or curves that are used to represent relations between two (or more) variables. A line graph is a useful method of illustrating scientific principles and hypotheses important for the economic analysis.
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 Lesson Contents Unit 1: Factor Markets Getting Paid Trading Resources Resources Factor Payments Circular Flow Unit 1 Summary Unit 2: Derived Demand Factor Demand A Few Issues Marginal Productivity Theory Three (Or Four) Marginals Unit 2 Summary Unit 3: The Curve Marginal Revenue Product Schedule Marginal Revenue Product Curve The Hiring Decision Factor Demand Curve Unit 3 Summary Unit 4: Determinants Shifting Demand Product Demand Factor Productivity Other Prices Unit 4 Summary Unit 5: Taking Stock Review Preview Unit 5 Summary Course Home
Factor Demand

• The first unit of this lesson, Background, begins this lesson by laying the foundations for the study of factor demand.
• In the second unit, Derived Demand, we see how the demand for a factor of production is based on the demand for the good it produces.
• The third unit, The Curve, then derives the factor demand curve, which is the relation between the price employers are willing to pay and the quantity demanded.
• In the fourth unit, Determinants, we examine the three key determinants that shift the factor demand curve -- product price, factor productivity, and other factor prices.
• The fifth and final unit, Taking Stock, then closes this lesson with a review of factor demand and a preview of factor market analysis in other lessons.

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AVERAGE VARIABLE COST

Total variable cost per unit of output, found by dividing total variable cost by the quantity of output. When compared with price (per unit revenue), average variable cost (AVC) indicates whether or not a profit-maximizing firm should shut down production in the short run. Average variable cost is one of three average cost concepts important to short-run production analysis. The other two are average total cost and average fixed cost. A related concept is marginal cost.

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