Asked by Alaina Warburton on Jun 19, 2024
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According to the marginal productivity theory of income distribution,every factor of production is paid a wage equal to the equilibrium value of its marginal product.
Marginal Productivity Theory
A theory stating that the demand for a factor of production is derived from the marginal product that the factor adds to the output.
Equilibrium Value
The price and quantity at which supply and demand in a market are balanced.
Marginal Product
The increase in output that results from employing one more unit of a particular input, holding all other inputs constant.
- Comprehend the fundamental concepts of the marginal productivity theory regarding income allocation.
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Learning Objectives
- Comprehend the fundamental concepts of the marginal productivity theory regarding income allocation.
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