Council for Economic Education Glossary

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The quantity and quality of human effort available to produce goods and services.

Labor Force
The people in a nation who are aged 16 or over and are employed or actively looking for work.

Labor Market
The labor supply and labor demand curves. The intersection of the labor supply and labor demand curves determines the equilibrium wage and the quantity of hours people work at this equilibrium wage.

Labor Union
An economic institution that represents an organized group of workers (by industry or by type of worker regardless of the industry) to negotiate with management by means of collective bargaining.

Lagging Indicators
Economic variables such as the prime interest rate, labor cost per unit of output, inventories to sales ratio and unemployment duration that tend to change after real output changes.

"Gifts of nature" that can be used to produce goods and services; for example, oceans, air, mineral deposits, virgin forests and actual fields of land. When investments are made to improve fields of land or other natural resources, those resources become, in part, capital resources. Also known as natural resources.

Late Fee
In a credit arrangement, a fee charged when payment is received after the due date.

Law of Demand
As the price of a good or service rises (or falls), the quantity of that good or service that people are willing and able to buy during a certain period of time falls (or rises).

Law of Diminishing Marginal Returns
Describes a phenomenon observed in all short-run production processes, when at least one input (usually capital) is fixed. As more and more units of a variable input (usually labor) are added to the fixed input, the additional (marginal) output associated with each increase in units of the variable input will eventually decline. In other words, successive increases in a variable factor of production added to fixed factors of production will result in smaller increases in output.

Law of Diminishing Marginal Utility
A widely observed relationship in which the additional satisfaction (marginal utility) associated with consuming additional units of the same product in a given amount of time eventually declines.

Law of Supply
As the price of a good or service that producers are willing and able to offer for sale during a certain period of time period rises (or falls), the quantity of that good or service supplied rises (or falls).

Leading Economic Indicators
Economic variables such as unemployment claims, manufacturers' new orders, stock prices, and new plant and equipment orders that tend to change before real output changes.

Legal and Social Framework
The system of laws, institutions, traditions and customs, and incentives that forms the basis of a society and its economy.

Legal Forms of Business
Forms of business organizations protected by a nation's laws; in the United States, the three forms of business organization are the corporation, partnership and sole proprietorship.

Legal Foundations of a Market Economy
The laws and institutions that support a market economy; examples include protection of private property and enforcement of contracts.

To grant someone the use of something, on condition that the object borrowed or its equivalent will be returned (often with interest, in the case of money).

One who lends; may be an individual or a business.

Letter of Application
A letter written by a job-seeker to a prospective employer in which the job-seeker may introduce himself or herself, express interest in a particular job, describe his or her qualifications for that job, request an interview and generally seek to convince the employer that he or she would make a great employee.

Legal responsibility to pay for damages or losses one has caused.

Liability Insurance Coverage
Automobile insurance that pays for costs of bodily injury and property damage when the insured person damages someone or something with his or her car.

Liquid Investments
Investments or savings (such as savings accounts and money market mutual funds) from which money can be accessed immediately.

To wind up the affairs of a company by identifying liabilities and selling off assets in order to make payments to creditors.

The ease with which savings or investments can be turned into cash.

Liquidity Risk
The chance that an investor will find it difficult to turn an investment into cash (by trying to sell a house, for example, in a down market for real estate).

Loan Scam
An illegal scheme in which somebody runs an advertisement, targeted to people who have run up large debts, offering a personal-debt consolidation loan on terms that seem to be very attractive. The consumer is instructed to send in a fee in order to obtain the loan. The loan never arrives.

Loanable Funds Market
Market in which the supply and demand for money, in the form of bank deposits and loans, determine the interest rate.

Long Run
A period of time long enough for firms to change the quantities of all the resources they use; the exact amount of time varies depending on the industry.

Long-Term Goal
Something a person or organization plans to achieve at least five years in the future.