BACKWARD BENDING SUPPLY CURVE OF LABOR

GLOSSARY

BACKWARD BENDING SUPPLY CURVE OF LABOR:

      The supply curves are positively sloped. However, in case of labor supply curve, there can be exception to it. The labor supply curve can be backward bending. The labor supply curve slopes upward from left with the increase in wage rate. After a certain rise in wage rate, the high wage individuals reduce their work and prefer to consume more leisure. The supply curve of labor then bends backward Further increases in the wage rate reduces the quantity of labor supplied in the market.

LAW OF DEMAND:

              The law of demand states the relationship between the quantity demanded and the price of a good. if states “ when the price of a good falls, its quantity demanded increases and when the price of a good rises, its quantity demanded decreases, other things being equal.” This law implies that the quantity demanded of a good and the price are inversely related.

LAW OF DIMINISHING MARGINAL RETURNS:

         This law in also named as the law of variable proportions, the law states  that when more and more units of a variable input are applied to a given quantity of fixed resources. The total output may initially increase at a diminishing rate and then at a constant rate b but it will eventually increase at a diminishing rate.

LAW OF DIMINISHING MARGINAL UTILITY:

          The principle state that as the consumption of a particular good increases over a given period of time, the extra benefit or the marginal utility decreases. In other words we can say that as a person gets or consumes more and more of a thing, his intensity of desire for that thing gradually diminishes.

LAW OF EQUI-MARGINAL UTILITY:

          The law of equi-marginal utility or the law of substitution states that a consumer is in equilibrium when he distributes his given money income among various consumer goods in such a way that marginal utility derived from the last rupee spent on each good is the same. In the case of three goods x, y and z a consumer is in equilibrium when mux/px= muy/py=muz/pz.

LAW OF INCREASING RETURNS:

         The law of increasing returns states, that when a firm adds more and more units of a variable factor to a given amount of fixed, resources, then each additional unit of variable factor  yields a higher marginal return.

ACCOUNTING PROFIT:

         Accounting profit is the difference between a firm’s total revenue minus its explicit cost.

ALLOCATIVE EFFICIENCY:

          It is condition when the resources are used to produce the goods and services which are most preferred by consumers.