1907 05-11 Production with One Variable Input (Labor) 。 Observations: When MP =0,TP is at its maximum When MP AP,AP is increasing -When MP<AP,AP is decreasing When MP AP,AP is at its maximum Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 05-11 • Observations: – When MP = 0, TP is at its maximum – When MP > AP, AP is increasing – When MP < AP, AP is decreasing – When MP = AP, AP is at its maximum Production with One Variable Input (Labor)
Production with One Variable Input(Labor) AP=slope of line from origin to a point on TP,lines b,&c. MP=slope of a tangent to any point on the TP line,lines a c. Output Output per per Month D Month 112 30 60 20 10 012345678910 Labor per Month 012345678g10ab0r per Month
Production with One Variable Input (Labor) Labor per Month Output per Month 60 112 0 2 3 4 5 6 7 8 9 10 1 A B C D 8 10 20 E 0 234567 1 9 10 30 Output per Month Labor per Month AP = slope of line from origin to a point on TP, lines b, & c. MP = slope of a tangent to any point on the TP line, lines a & c
490 05-13 Production with One Variable Input (Labor) The Law of Diminishing Marginal Returns As the use of an input increases in equal increments,a point will be reached at which the resulting additions to output decreases (i.e.MP declines). Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 05-13 • As the use of an input increases in equal increments, a point will be reached at which the resulting additions to output decreases (i.e. MP declines). Production with One Variable Input (Labor) The Law of Diminishing Marginal Returns The Law of Diminishing Marginal Returns
05-14 Production with N One Variable Input (Labor) The Law of Diminishing Marginal Returns When the labor input is small,MP increases due to specialization. When the labor input is large,MP decreases due to inefficiencies. Assumes the quality of the variable input is constant Assumes a constant technology Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 05-14 • When the labor input is small, MP increases due to specialization. • When the labor input is large, MP decreases due to inefficiencies. • Assumes the quality of the variable input is constant • Assumes a constant technology The Law of Diminishing Marginal Returns The Law of Diminishing Marginal Returns Production with One Variable Input (Labor)
1907 05-15 4.3 Production Function in the Long Run Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 05-15 4.3 Production Function in the Long Run