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LAW OF DIMINISHING MARGINAL UTILITY: The principle stating that as more of a good is consumed, eventually each additional unit of the good provides less additional utility--that is, marginal utility decreases. Each subsequent unit of a good is valued less than the previous one. The law of diminishing marginal utility helps explain the negative slope of the demand curve and the law of demand.
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Lesson 23: Factor Market Equilibrium | Unit 1: Intro
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Page: 3 of 24
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- Let's review the notion of equilibrium.
- Equilibrium is the state that exists due to a balance between opposing forces, which remains unchanged until another force intervenes.
- Once achieved, equilibrium persists unless or until it is disrupted by an outside force.
- Equilibrium in the factor market works much the same, with the two opposing forces being:
- Factor Demand
- Factor Supply
- When these two opposing forces of factor demand and factor supply are in balance, we have factor market equilibrium.
- Should the factor market be out of equilibrium, then like any other market, it can experience a surplus or a shortage.
- A factor market surplus, especially in labor markets, is more commonly termed unemployment.
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AVERAGE TOTAL COST CURVE A curve that graphically represents the relation between average total cost incurred by a firm in the short-run product of a good or service and the quantity produced. The average total cost curve is constructed to capture the relation between average total cost and the level of output, holding other variables, like technology and resource prices, constant. The average total cost curve is one of three average curves. The other two are average variable cost curve and average fixed cost curve. A related curve is the marginal cost curve.
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BLUE PLACIDOLA
[What's This?]
Today, you are likely to spend a great deal of time watching infomercials looking to buy either a how-to book on the art of negotiation or a flower arrangement for your aunt. Be on the lookout for celebrities who speak directly to you through your television.
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Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.
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"Chance favors only the prepared mind." -- Louis Pasteur, biologist
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WAPM
Weak Axiom of Profit Maximization
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