Yr 2 Law of diminishing returns Flashcards
Definition of LODR, please :)
Every time a variable FOP(labour) is added to fixed FOP(Capital or land), total/marginal product will rise and then fall…
Is the LODR concept LR or SR?
It’s SR, because….
What does the short-run mean? :)
There is 1 variable FOP which tends to be labour and every other FOP is fixed.
Just an extra.. what are sunk costs?
Costs that firms pay in the short run that is unrecoverable if they wish to leave the industry.
Just an extra.. what are sunk costs?
Costs that firms pay in the short run that is unrecoverable if they wish to leave the industry.
Give an example of why LODR is the way it is
Talk about the labour at the start with scarce fixed FOP, they are productive and efficient, and then as more come, fixed FOP will become scarce, labour get in each others way and total and marginal product falls.
Draw the total, average, and marginal product diagram
PEEK A BOO
Draw the total, average, and marginal product diagram
PEEK A BOO
When MP is at 0, why does the total product peak then?
Marginal product is the extra output created, so if that’s 0, no extra products being made, so, total product will peak and then fall
When MP is at 0, why does the total product peak then?
Marginal product is the extra output created, so if that’s 0, no extra products being made, so, total product will peak and then fall
What’s the equation for MP and AP?
AP = TP / Q MP = CHANGE IN TP / CHANGE IN Q
Definition of total product
Total output produced by a firm given the factor input
AP x Variable input
Definition of Average product
Total output produced by a firm divided by the amount of variable input
total output / variable input
Definition of marginal product
Difference between total output when an extra unit of a variable factor is inputted
change in total output/change in the variable input
