Question

Define/describe

1. the importance of non-labor income

2. marginal product of labor (and its relation to wages)

3. marginal product of capital (and its relation to rents)

4. aggregate supply curve for labor

5. aggregate demand curve for labor ( and where it comes from)

Answer 1

1) NLI or Non-labour income is one of the largest and fastest growing sources of income. It is the income from any source other than the supply of labor. And it includes capital gains, interest, transfer payments, dividends etc. The classification of NLI is associated with investments, aging and economic hardships. NLI is more important for all western countries .It is important to understand both makeup of Non-labor income and how it is distributed.

2) The marginal product of labor or MPL is the change in output. It is resulted from employing an added unit of labor. That means the marginal product of labor is the change in output per unit change in labor.

3) Marginal product of capital can be defined as the additional production a company experience by adding unit of capital. That means it is the additional unit of production with one unit of physical capital.

4) The aggregate supply curve is a curve that shows the relationship between the price level and output. If the long run aggregate supply curve is vertical then the short run aggregate supply curve will be upward sloping.

5) The aggregate labor demand curve is a downward sloping curve of the real wage. If the real wage increases workers become more expensive to firms and demand very less labor. And the aggregate labor demand curve is the labor demand curve for the entire economy. That is the sum of all the firms individual demand curves.