ECON 111 Lecture Notes - Lecture 6: General Idea, Opportunity Cost, Fixed Cost

• School: Queen's University
• Department: Economics
• Course: ECON 111
• Professor: Ugurhan Gazi Berkok

Document Summary

Econ 111 lecture 6 firms. *chapter 7 in the textbook. How well a firm produces: considering an example like starbucks. Your inputs are the money you put in, and your outputs are what come out of the machine. Different combinations of money will get you different food items. In sr, at least one of the inputs (usually k) is fixed, and the production becomes. Sr (short term) versus lr (long term: y = f(l,k0) In lr, substitution between l and k is possible. The production function in the long run has fewer constraints: note: we can also consider very long run scenario. In this case the production function is different (covered in chapter 25). Figure 1 shows the short- term production function. Two effects will determine the curvature of. Taken from the course lecture slides: let"s look more closely at the capital- labour ratio effect. Consider again the starbucks example. The size of the coffee shop (k) is fixed.