Class Notes (1,100,000)
CA (650,000)
UTSC (30,000)
MGEA02H3 (200)
Lecture 12

MGEA02H3 Lecture Notes - Lecture 12: Marginal Product, Market Power, Kurdistan Workers' Party


Department
Economics for Management Studies
Course Code
MGEA02H3
Professor
Gordon Cleveland
Lecture
12

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MGEA02H Week 6
Review of key production concepts
q = f(K, L) Production Function
q = g(L) Short-run Production
Function
dq/dL Marginal Product of
Labour
d2q/dL2 (or dMPL/dL) < 0 (eventually)
This is called diminishing marginal
product
Law of Diminishing Returns” (or law
of diminishing marginal product, or law
of variable proportions)

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The law of diminishing returns
states "that we will get less and less
extra output when we add additional
doses of an input while holding
other inputs fixed. In other words,
the marginal product of each unit of
input will decline as the amount of
that input increases holding all other
inputs constant.
Wikipedia
Average product of labour = q/L

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Productivity is linked to costs!
Assume simple pizza firm uses K and L to
produce q.
q = f(K, L) production function
K is fixed, so
Assume
q = 28L + 4L2 – L3
This production function represents the
best available pizza production technology,
showing output of pizzas as a function of
the amount of labour inputs (with K fixed).
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