Kaplan- C5 Notes - 5.1.1 1817 David Ricardo “Principles...

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5.1.1 1817- David Ricardo- “Principles of a Political Economy” argues supply was perfectly elastic The cost of production determined the supply, and therefore the price. Time and Opportunity Cost are factors 5.1.2 Long Run Condition - (GCE/ Fair Race Assumption/ No Market Power and Failure) all adjustments have been made, when the entire scale of production has time to fully adjust Short Run Condition - looking to make something better (our constant state) Market Period Condition - an immediate position where there is a fixed amount of something available/ where we stand in the market 5.1.3 Diminishing Marginal Productivity - Holding all other factors constant, as you increase one input, you eventually get less output from each successive unit Unit of Labor MP for labor in coffee | Marginal Cost 1 25 | .80 2 100 | .20 3 200 | .10 4 180 | .11 5 160 | .13 6 140 | .14 7 120 | .17 8 110 | .18 9 100 | .20 10 90 | .22 *Drinking coffee initially gives you a boost, but eventually decreases as you become tired Marginal Costs
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  • Fall '13
  • ScottKaplan
  • Economics, Unit of Labor

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