COMM 295 Lecture Notes - Lecture 2: Diminishing Returns, Marginal Product, Production Function
Document Summary
The short-run is a period in which there is at least one fixed input (e. g. labour). The short-run production function defines the relationship between the quantity of variable factors employed and total product. Refers to the increase in total product, for a given increase in the quantity of labour. The average product of labour refers to the total product per unit of labour employed. If a firm continually increases an input, holding the quantity of other inputs and technology constant, the corresponding increases of output will eventually become smaller and smaller. Diminishing returns; refers to changes in total product not marginal product. Marginal product is not expected to fall unless the quantity of other factors of production and technology are held constant. Refers to the change in output when a firm increases all of its inputs proportionally. Firms usually exhibit increasing returns at low levels of output and decreasing returns at high levels of output.
