Documents about Diminishing Marginal
keys
Maple Springs, ECON 1000
Excerpt: ... LECTURE 5 : consumer choice key terms : budget line relative prices real income marginal utility principle of diminishing marginal utility indifference curve marginal rate of substitution ...
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Chapter 13 Notes
Cornell, ECON 1110
Excerpt: ... Chapter 13 Notes-review slides you slept through asshole Total cost-the market value of the inputs a firm uses in production Curve is positive slop and gets steeper as it goes b/c cost increases as a result of diminishing marginal product property Profit = Total revenue total cost Cost of production-all opportunity cost of making its output of goods and services Explicit costs-input costs that require an outlay of money by the firm Implicit costs-input costs that do not require outlay of money by the firm Cost of capital can be considered an opportunity cost- ie it could be in a bank earning interest Economic profit= total revenue (implicit and explicit costs) This is what motivates firms to supply goods and services Important for firm viability Accounting profit= total revenue explicit costs Accounting profit generally larger b/c it fails to account for implicit costs Production function-relationship between the quantity of inputs and the quantity of outputs Plateaus b/c of diminishing marginal product ...
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Jan. 31
UConn, ECON 112
Excerpt: ... Lecture Scarcity And Opportunity Costs 1. Production function diminishing marginal productivity 2. production possibilities frontier (PPF) opportunity costs 3. a note about growth and well-being Homework 1: part 1 due 2/8/08 Chp. 2 p.37 #3 Chp. 3 p.46 #6; p.49 #9 Chp. 4 p.62 #8; p.63 #9; p.65 #12 Chp. 5 p.81; #9 1/31/2008 9:33:00 AM Scarcity-Fundamental problem in economics -unlimited wants -limited supply Different world views which suggest that we should not unlimited wants (happy w/o unlimited wants) Opportunity Cost- the cost of choosing one thing and giving up another thing; the best forgone alternative given up Profit- (revenue minus expenses) Marginal Product of Labor- the change in output due to the change in input MPL= Q L marginal=change diminishing marginal productivity- eventually additional increases in an input result in smaller and smaller increases in output (total output didn't go down, just didn't increase as much as before) -would have to be negative in order to decrease output -is t ...
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Econ 4010 Lecture 2
USC, ECON 4010
Excerpt: ... <Lecture 2> 3. Consumer Behavior: Maximizing Utility Budget Line slope of the budget line An increase in consumer income A decrease in consumer income A decrease of price of food An increase in price of food - A change in price of clothing indifference curvesbudget lines Maximizing Utility the slope of the indifference curveslope of the budget line MRSratio of the price Corner Solutions Maximizing Utility control variables Marginal Utility Diminishing Marginal Utility ...
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lesson06
UNL, ECON 212
Excerpt: ... lesson06 Page 1 of 2 Unit 2 > Lesson 6 Consumer Behavior and Utility Maximization Introduction Consumer behavior is an essential component of microeconomics. Remember in Chapter 1, we said microeconomics was concerned with the trees in the forest and not the overall forest. How consumers react to price changes, with limited income helps explain the law of demand. Chapter 8 discusses consumer utility (satisfaction), marginal utility, the law of diminishing marginal utility, and the maximizing utility rule. All of these are important in determining the behavior of consumers. Objectives At the end of this lesson you should be able to: define and distinguish between the income and substitution effects of a price change. explain why a consumer will buy more of a commodity when its price falls by using the income and substitution effects. explain why a consumer will buy less of a commodity when its price rises by using the income and substitution effects. define marginal utility and state the law of diminishing ...
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lecture4
Simon Fraser, ECON 103
Excerpt: ... Economics 103 Lecture # 4 Diminishing Marginal Value The Third Principle in Economics is Diminishing Marginal Value It doesnt matter what the good, the more you have the less youre willing to pay for more. -your boyfriend/girlfriend? - child? -water? - married couples in restaurants Why is variety the spice of life? Why do you consume everyday but get paid every fourteen? Why do you save over the life-cycle? Some things to note: - maximum willingness to pay = MV. - Principle number 3 refers to a rate of consumption. - everything else is held constant. income, prices, laws, etc. What are the three principles that describe preferences? 1) Maximization 2) Substitution 3) DMV Even though everyone is assumed to behave according to these principles, there is lots of room for differences. What Prevents us from consuming whatever we want? The Budget Constraint. M = Px X + Py Y Y = M/Py - Px/Py X Real Income: Income in terms of real goods. -how many hours of work did it take to purchase my $1 ...
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Econ2010_07_Answer
Utah, ECON 2010
Excerpt: ... total mittens, an increase of three mittens. Her labor cost is $15/hour. Thus, the marginal cost expressed in terms of dollars per mitten is $5 per mitten. It takes Lynn an entire hour (the third hour) to produce her eighth mitten. Thus, her marginal cost is $15 per mitten to produce the eighth mitten. Q8. The short-run marginal cost curve in the traditional microeconomics model eventually rises because of a. diminishing marginal returns. b. rising fixed costs. c. diseconomies of scale. d. diminishing marginal revenues. e. increasing marginal productivity of variable inputs. Use the following graph, which shows the relation of hours of labor input to the production of haircuts, to answer Questions 9-14. The values listed on the graph represent the number of haircuts at each level of labor input. 2 Q9.How many haircuts can be produced if a total of 4 labor hours are used? a. 14 b. 19 c. 19 4 d. 19 / 4 e. You can't tell from the graph. Q10.During the fourth hour, how many haircuts are produced? a. 14 b. 1 ...
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ECO365 Week 2 Prof Comments
University of Phoenix, BUS ECO 365
Excerpt: ... ECO365 Week 2 Professor Comments This additional lecture will cover the most important concepts to take away from week 2. These concepts are: diminishing marginal productivity, technical and economic efficiency, economies and diseconomies of scale, demand and supply of labor, and income redistribution. First the law of diminishing marginal productivity. Diminishing marginal productivity occurs when adding more production inputs (ie labor) to a fixed input (ie capital) results in slower output growth. Initially, as inputs are added to the production process, output increases and exhibits increasing marginal productivity. However, at some point the increase in output will slow and eventually decline (ie negative marginal productivity). For example, as more labor is added to a fixed amount of capital output will increase. But at some point adding more labor will not achieve constant output growth because too much labor (with a fixed amount of capital) becomes unproductive. This concept can be seen by looking at ...
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ps6
Berkeley, ARE 100
Excerpt: ... PROBLEM SET 6 ETHAN LIGON Questions marked (T,F,U) should be answered True, False, or Uncertain, and your answer should be briey justied. Note that points will be awarded based only on your reasoning, not on the answer itself, even if correct. (1) (T,F,U) A wise entrepreneur will minimize costs for a given output rather than maximizing output for a given cost (2) (T,F,U) You should quit studying once you reach the point of diminishing marginal returns. (3) (T,F,U) Diminishing marginal returns to labor need not imply decreasing returns to scale. However, increasing marginal returns to labor would imply increasing returns to scale. (4) Show that production function f (k, l) = k 2 + l, k 0, l 0 does not represent a decreasing, increasing, or constant returns to scale technology. (5) Suppose that housing (measured in square feet) is produced using inputs of land (Z), capital (K) and labor (L) via the production function y = AK 1 L2 Z 3 where (A, 1 , 2 , 3 ) are kno ...
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10-27-98
Santa Clara, ECON 401
Excerpt: ... Economics 401 Lecture outline 10/27/98 1. In-class mid-term information Date: This Thursday (10/29) It's optional: You can walk out without handing it in if you want Topics: all topics through last Thursday's lecture (basically, demand, elasticity, pricing, and regression) Format: about 15 multiple choice and two (multi-part) problems You may bring one sheet of notes (both sides OK) Preparation: review your notes, do the homework! Production and costs: introduction Production function Q = f(L, K, other inputs) Marginal product: change in output for a small change in one input, holding all other inputs constant (partial derivative) Law of diminishing marginal returns Marginal product with fixed capacity constraint Average product Optimal input utilization Choose L (or other input) to maximize profit: MR*MPL = MCL If both input and output markets are competitive, this implies P*MPL = W , where P is the output price and W is the wage rate (this equation defines the firm's demand curve ...
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topic6
CSU San Marcos, ECON 250
Excerpt: ... us on 3 costs: Total Cost (TC), Average Total Cost (ATC), Marginal Cost (MC) TC = Cost of using inputs to produce given output ATC = (Total Cost) / (Output) MC = in TC from producing one more unit of output = ( TC) / ( Output) Numerical examples: Total Cost of 1st unit = 150 Total Cost of 2nd unit = 180 Then for 2nd unit produced: ATC = 180 / 2 = 90 (NOTE: Total Cost = ATC x Output = 2 x 90 = 180) Marginal Cost = TC of 2nd unit (180) TC of 1st unit (150) = 30 Marginal Physical Product (MPP), Diminishing Marginal Returns, and MC MPP = Extra output from hiring another unit of input (e.g., labor hour): MPP = ( Output) / ( Input) Law of Diminishing Marginal Returns As more input added (to fixed inputs), it's additional productivity declines Adding another unit increases output by less than previous one. MPP at some point declines Diminishing Marginal Returns Underlies Concept of Marginal Cost (MC) MC = in cost associated with in Output = ( TC) / ( Q) Changing output ...
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Study_Guide_2
Arizona, TRAD 104
Excerpt: ... sub.=inelastic 3) Fraction of Income large fraction=elastic; small fraction=inelastic 4) Time Elapse short-term =elastic; long-term=inelastic ii. Three Elasticity Cases Graphs Perfectly elastic Perfectly inelastic Straight Line Demand Curve Equations Relationship to Total Revenue Study Guide 2, Economics 200, 2 II. Law of Demand a. Define: -Individual Self-Interest - everyone looks out for themselves -Law of Demand If price raises quantity demanded goes down -Income Effect the higher your income the more you can buy -Substitution Effect lots of substitutes make the price go down -Utility - satisfaction - Total Utility complete satisfaction - Marginal Utility extra satisfaction form consuming an extra unit -Law of Diminishing Marginal Utility too much of something isn't good b. Define and Graph: -Indifference Curve (including slope) -Indifference Map -Budget Line (including slope, and effects of income and price changes) c. 3 Conditions for a Successful Illustration d. 1st Illustr ...
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3
Berkeley, ECON 001
Excerpt: ... is the satisfaction, or reward, a product yields relative to its alternatives. The basis of choice. Marginal utility is the additional satisfaction gained by the consumption or use of one more unit of something. Example: Utility from five slices of pizza versus marginal utility from fifth slice of pizza. 07/02/07 Economics 1 Lecture 3 07/02/07 Economics 1 Lecture 3 Diminishing Marginal Utility The law of diminishing marginal utility: The more of one good consumed in a given period, the less satisfaction (utility) generated by consuming each additional (marginal) unit of the same good. Diminishing Marginal Utility Total Utility and Marginal Utility of Trips to the Club Per Week TRIPS TO CLUB TOTAL UTILITY MARGINAL UTILITY 1 2 3 4 5 6 12 22 28 32 34 34 12 10 6 4 2 0 Total utility increases at a decreasing rate, while marginal utility decreases. 07/02/07 Economics 1 Lecture 3 07/02/07 Economics 1 Lecture 3 Diminishing Marginal Utility and Downward-Sloping Dema ...
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1-16-09
Allegheny, ECON 200
Excerpt: ... Microeconomics Class Notes 1/16/09 CALCULUS Review We will be working on a lot of Calculus first. We use calculus to validate our hypotheses and/or theories we can see the implications of the theory and if they are true or not. Utility (from money) Variable x is the amount of money The function Uis utility. U(x) The utility from money. As x increases, U increases. Curve 1 is what we expect: As X increases, U increases at a decreasing rate. The first dollar that we get is worth more to us than the billionth dollar. This is called the diminishing marginal utility for money. (The change in utility) / (change in X) = the marginal utility. How much extra utility do I receive from consuming an extra $ The second derivate = derivative of the first derivative (1st derivative). EXAMPLE: Two different payment schemes: Payment Scheme Payment A Payment B Pay $100 50% of $200 50% of $0 We prefer payment scheme A instead of payment scheme B because B is riskier. The Expecte ...
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Chapter 8 Producers 1
University of Maine, PHY 121
Excerpt: ... 6 7 8 0 10 25 45 60 70 75 75 70 (3) Marginal Product (MP), Change in (2)/ Change in (1) 10 15 20 15 10 5 0 -5 Increasing Marginal Returns Diminishing Marginal Returns Negative Marginal Returns Graphical Portrayal Total Product, TP 30 20 10 0 Marginal Product, MP I II III TP (3) Average Product (AP), (2)/(1) 10.00 12.50 15.00 15.00 14.00 12.50 10.71 8.75 1) Note when MP intersects AP! 2) Note what happens to TP when MP hits zero! ] ] ] ] ] ] ] ] 1 2 3 4 5 6 7 8 9 Increasing Marginal 20 Returns Diminishing Marginal Returns Negative Marginal Returns 10 1 2 3 4 5 6 7 AP 8 9 MP REMEMBER! FOR WEDNESDAY: Bring In Class assignment from WebCT We will use on Wed and Friday Key Terms Explicit Costs Implicit Costs Economic Costs Economic Profit Short Run Long Run Total Product (TP) Marginal Product (MP) Average Product (AP) Homework #4 Moved to 3/26/08 Next Wednesday 4 ...
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Chapter_8_Study_Guide_Omissions
Baylor, ECONOMICS 2306
Excerpt: ... review the following concepts: What is the firm's fixed cost? If this firm is suffering economic losses at all levels of output, why doesn't it just shut down temporarily? At what quantity of output do diminishing marginal returns set in, and how do you know? If you were to graph these cost data, at about what level of output would the marginal cost curve intersect the average variable cost curve and the average total cost curve, respectively? ...
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cost
Rollins, ECO 503
Excerpt: ... NOTE: Don't be concerned with the material in the book about break-even analysis or graphs of different cost functions Why study costs? different types of costs should play different roles in decision making part of the basis for output and pricin ...
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class7
UCLA, ECON 1
Excerpt: ... Econ 1 section 7 Corey Garriott (cgarriott@ucla.edu) Feb. 25, 2008 There are no section 6 notes posted because I just went over the midterm that day (to the, oh, six students who showed up for it). As for the session we missed during President's Day, let's talk about how to handle that today. I am going to cover lectures 11 and 12 today. Lecture 11 appears to restate much of lecture 10, so I will skip it so we can get caught up after President's Day. 1 Definitions Utility: Any measure that is interpreted as a ranking. Marginal utility: The change in utility caused by eating/using/having one additional unit. Diminishing marginal utility: A downward sloping marginal utility schedule (i.e. on a graph). Rational: This is a big one in economics. An agent is "rational" if its goal in life is to maximize a quantity (utility) acting strategically using all the information available to it exhaustively and without making mistakes. Maybe that doesn't sound like what you mean by rationality, but economis ...
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lect6205
Sonoma, USERS 205
Excerpt: ... osts: cost changes as Q changes. 1. raw materials, labor (sometimes), maintenance. 2. TVC = Total Variable Costs a. AVC = average variable costs = TVC/Q. b. as Q increases, AVC falls and then rises. (has a minimum) C. Total Cost: TFC + TVC = TC D. Average Cost: ATC = AFC + AVC P P MC ATC TFC AVC AFC Q The Principle of Diminishing Returns Returns: A. Marginal Cost* 1. the cost of each additional unit produced. 2. MC = change in TC/ change in Q 3. goes down at first, reaches a minimum, then increases. B. When MC is at its minimum, diminishing marginal returns set in. C. MC = AVC at AVCmin: why? 1. when at the minimum, AVC is greater than MC until then. 2. MC greater than AVC pulls AVC up due to diminishing returns. D. MC = AC at Acmin: same idea as AVC. E. Remember, diminishing marginal returns leads to higher costs for each additional unit. This causes absoulte costs to rise accordingly. The Long-Run and Economies of Scale. A. Over time, production is variable and all costs are variable (ATC = AVC) B. ...
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Chp03
Emory, E 212
Excerpt: ... LECTURE NOTES FOR INTERMEDIATE MACROECONOMICS CHAPTER 3: MEASURING PRODUCTION / LABOR MARKET I. How Much Does the Economy Produce? The Production Function A. Factors of production 1. Capital 2. Labor 3. Others (raw materials, land, energy) 4. Productivity of factors depends on technology and management The production function 1. Y = AF(K,N) 2. Parameter A is "total factor productivity" a. Productivity moves sharply from year to year b. Productivity grew slowly in the 1980s and the first half of the 1990s B. C. The shape of the production function 1. Two main properties of production functions a. Slopes upward: more of any input produces more output b. Slope becomes flatter as input rises: diminishing marginal product as input increases 2. Graph production function (Y vs. one input; hold other input and A fixed) a. Marginal product of capital, MPK = Y/K (1) Equal to slope of production function graph (Y vs. K) (2) MPK always positive (3) Diminishing marginal productivity of capital b. Marginal product ...
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Chapter 3 Key
NMSU, ECON 371
Excerpt: ... Chapter 3 Homework Key 1. Consider the utility function U ( x , y ) Due: February 20, 2007 y x with MU x y / 2 x and MU y x. a. Does the consumer believe more is better for each good? Explain. Since U increases whenever x or y increases, more of each good is better. This is also confirmed by noting that MUx and MUy are both positive for any positive values of x and y . b. Do the consumer's preferences exhibit a diminishing marginal utility of x? Explain. Is the marginal utility of y diminishing? Explain. Since MU x y 2 x , as x increases (holding y constant), MU x falls. Therefore the marginal utility of x is diminishing. However, MU y x . As y increases, MUy does not change. Therefore the preferences exhibit a constant, not diminishing, marginal utility of y. 2. The utility that Julie receives by consuming food F and clothing C is given by U ( F ,C ) For this utility function, the marginal utilities are MU F FC . C and MU C F. a. On a graph with F on the horizontal ...
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Econ2010_07
Utah, ECON 2010
Excerpt: ... model eventually rises because of a. diminishing marginal returns. b. rising fixed costs. c. diseconomies of scale. d. diminishing marginal revenues. e. increasing marginal productivity of variable inputs. - Increasing / Constant / Decreasing MC Use the following graph, which shows the relation of hours of labor input to the production of haircuts, to answer Questions 9-14. The values listed on the graph represent the number of haircuts at each level of labor input. Q9.How many haircuts can be produced if a total of 4 labor hours are used? a. 14 b. 19 c. 19 4 d. 19 / 4 e. You can't tell from the graph. Q10.During the fourth hour, how many haircuts are produced? a. 14 b. 19 c. 4 d. 5 e. You can't tell from the graph. Q11. During the fifth hour, how many haircuts are produced? a. 19 b. 23 c. 4 d. 5 e. You can't tell from the graph. 3 Q12. Moving from three to five hours of labor input, this production process is characterized by a. diminishing marginal returns. b. constant marginal returns. c. increasing ...
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Econ.2010.2nd.Exam
Utah, ECON 2010
Excerpt: ... marginal revenue. 9. Describe the meaning of diminishing marginal returns and increasing marginal costs. 10. Explain in words the price elasticity of demand and the price elasticity of supply. III. Answer the following questions. (15 points) 1. Which of the following is most likely to be a fixed cost of a manufacturing company? a. Shipping charges b. Property insurance premiums c. Wages for labor d. Utility bills 2. Which of the following is the best example of a short-run adjustment? a. The number of farms in the US declines by 5 percent. b. A local bakery hires a new cook. c. Six new firms enter the plastics industry. d. A new technology is introduced into the production process. *(3~4) The production relationship between the number of chapters that Tiffany studies in her history book (the variable input) and the number of points she will earn on a history exam (the output) is as follows: Chapters Studies Test Score 50 0 0 1 20 2 35 3 45 4 3. What is the marginal return of the third chapter Tiffany reads ...
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