MGEC40H3 Lecture Notes - Lecture 3: Ballpoint Pen, Horizontal Integration, A Reminder

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Outline for today: learning curve & learning economies, vertical boundaries & vertical integration. A reminder that horizontal speaks to quantity and variety. Vertical refers to a frozen quantity and variety, but looks at what percentage is made by outsourcing. The learning curve refers to cost advantages that result from accumulating experience & know-how. A resume shows your experience and what you should know. Learning economics (dynamic scale economies) refer to average cost reductions occurring over time due to accumulating experience (learning by doing) Taking piano lessons and being able to play well after many years. If there is learning, the learning curve is downwards sloping. The more learning, the more downwards sloping there is. A linear curve means learning speed is constant. We talked about the q being total accumulated output, but there is the question of since when the accumulation began, and of whom the accumulated know-how belongs to.

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