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MARGINAL PRODUCTIVITY THEORY: A theory used to analyze the profit-maximizing quantity of inputs (that is, the services of factor of productions) purchased by a firm in the production of its output. Marginal productivity theory indicates that the demand for a factor of production input is based on the marginal product of the factor and the price of the output produced by the factor.

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UNEMPLOYMENT

The general condition in which resources are willing and able to produce goods and services but are not engaged in productive activities. While unemployment is most commonly thought of in terms of labor, any of the other factors of production (capital, land, and entrepreneurship) can be unemployed. The analysis of unemployment, especially labor unemployment, goes hand-in-hand with the study of macroeconomics that emerged from the Great Depression of the 1930s. The most common measure of unemployment is the unemployment rate of labor. Unemployment is one of two primary macroeconomic problems. The other is inflation.

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