| Budget Line or Budget Constraint | A line in commodity space indicating what combinations of goods the consumer can buy with a given income. The budget line is also known as the income line, the consumer possibility line, the budget constraint, and the even wealth constraint.
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| Difference-in-Difference Estimator | An empirical means of netting out the impact of an economic event (e.g., the Earned Income Tax Credit - EITC) by comparing the trend in the "treatment group" (e.g., unmarried women with children who are eligible for EITC) with the trend in the "control group" (i.e., unmarried women without children who are not eligible for EITC).
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| Employment-Population Ratio | The fraction of the population that is employed.
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| Hidden Unemployed | Persons who desire to work at current wages, but are no longer searching for employment because they have been unable to find a job.
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| Income Effect | The impact of a change in nonlabor income (holding wage constant) on the demand for leisure or on the supply of hours of work.
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| Indifference Curve | A curve showing the locus of the quantity combinations of two goods (e.g., leisure and consumption) that provide the same level of utility (happiness). Thus, the individual is indifferent between any bundle of goods depicted on the curve.
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| Labor Force | The number of people who are either employed or unemployed in the population. Persons are considered to be out of the labor force if they are not actively seeking work.
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| Labor Force Participation Rate | The fraction of the population that is in the labor force.
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| Labor Supply Curve | The predicted relationship between hours of work and the wage rate.
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| Labor Supply Elasticity | A measure of the responsiveness of hours of work to a change in the wage rate.
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| Marginal Rate of Substitution in Consumption | The ratio of the marginal utility of leisure to the marginal utility of consumption, which is also the absolute value of the slope of an indifference curve.
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| Marginal Utility | A change in utility resulting from an addition dollar spent on one good, holding all other goods constant.
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| Neoclassical Model of Labor-Leisure Choice | The framework that economists typically use to analyze labor supply behavior.
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| Opportunity Set | The consumption and leisure bundles which are available to the worker; which lie on or below the budget line.
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| Reservation Wage | The wage that makes a person indifferent between working and not working. Alternatively, the reservation wage is the wage such that any wage above it, induces the individual to work.
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| Substitution Effect | The impact of a change in the price of leisure on hours of work, holding real income constant. It indicates, that workers substitute towards the good that has become relatively cheaper.
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| Unemployment Rate | The fraction of the labor force who are unemployed.
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| Utility Function | An index that measures the individual's level of satisfaction or happiness.
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