Econ Notes

6. Define:

Economic Rent – Price minus Opportunity cost. Any excess payment above the minimum you would accept for a good, service or property. Ex. If you would accept $45,000 for a job, but they offer you $60,000, your economic rent is $15,000.

Internal Labor Market – A company looking inside itself to find a suitable person to fulfill the role of the vacant senior job instead of hiring outside of the company.
Entry level jobs are usually the only source of External Labor Market here.
This method of hiring is preferred because it reduces hiring and training costs, improves employee motivation, and reduces effect of uncertainty.

Nominal Wage – A Labor wage in terms of today’s dollars in currency not counting for inflation or the amount of goods it will buy.
Wages measured in terms of money paid and not in purchasing ability.

Marginal Labor Cost -

Scale Effect -

Right-to-Work Law –

Substitution Effect – As prices rise, consumers will replace more expensive items with less costly alternatives.
The opposite of this effect is known as the Income Effect as inferior quality items are pushed to the side.

Real Wage – The income of an individual after taking into account the effect of inflation on your purchasing power.
Ex. If you receive a 2% increase in pay 1 year and inflation rises 1%, then your salary increase was only 1%. It is the amount of goods and services you can buy today compared to the same amount of goods and services you could buy at a different time period.
Ex. If it costs you $2,000 more this year to buy the same goods and services i.e. bills, then your salary has actually decreased by $2K.

Marginal Product – Change in quantity of one extra unit of output.
Change in output that occurs when one more unit of input (labor) is added.

Marginal Revenue Product – The change in revenue that results from