Labor DemandTerms Labor market - A large group of firms and workers in the same industry: the firms want to hire workers, the workers want jobs. The interaction between the two groups determines the market wage and quantity of labor used. Law of Diminishing Returns - Concept that the marginal revenue derived from additional units of labor decreases as quantities of labor increases. Marginal Product - The additional amount of goods generated by using one more unit of work. Marginal Revenue Product - The additional income generated by using one more unit of input. Marginal Revenue Product of Labor - The additional income generated by using one more unit of work. Market - A large group of buyers and sellers who are buying and selling the same good or service. Market-clearing Price - The price of a good or service at which quantity supplied is equal to quantity demanded. Also called the equilibrium price. Optimization - To maximize utility by making the most effective use of available resources, whether they be money, goods, or other factors.
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