Economics 1021A/B Lecture Notes - Consumer Choice, Arkansas Highway 5, Oil Platform

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Arvin Dar

Document Summary

Topic 6: production theory: returns to factors of production, theory of revenue, theory of cost, conditions for profit (ti) maximization, conditions for profit (ti) maximization and production, conclusions. Q = f (land, labour, capital, entrepreneurship) Five dimensions are needed to draw all of these. Average product = t. p (or q)/ l: looks at straight lines from 0,0 to whichever point is picked. Marginal product: q/ l or tp/ l where the denominator is taken to be 1: the addition to output when we employ one more individual. Ap you can only get a certain point of production. Eventually, you get to a point where the next person is not as important as the one before. Second section; law of diminishing mp of labour (law of diminishing returns to labour) If you don"t fix the other variables when you graph this, then output can increase forever too much labour = bigger factory = more machines.