EMG_344-3_AEVA_Lecture-5

EMG_344-3_AEVA_Lecture-5 - Production and Technological...

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Production and Technological Change Recommended Texts: Petersen H. C. and Lewis W. C. (1999), Managerial Economics, Prentice hall of India, Delhi Nicholson W.E. (1997), Intermediate Microeconomics and Its Application, The Dryden Press, United States World Development Forum , (various issues), Global Competitiveness Report http://www.gcr.weforum.org/ Ferri F., S Treadwell and M.A. Desai (2005), Understanding Economic Value Added, Harvard Business Publications
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Optimal Employment of Factors of Production Output of an additional worker = 2 units Price of output = 20 000 Thus additional revenue per worker = 40 000 Additional cost per worker 30 000 Should we hire the labour? If wage rate increased to 45 000, should we hire the worker?
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Optimal Employment of Factors L TP MP TR MRP 0 0 - - - 1 200 200 400 400 2 283 83 566 166 3 346 63 692 126 4 400 54 800 108 5 447 47 894 94 6 490 43 980 86 7 529 39 1058 78 Marginal Revenue Product (MRP) MRP L = MP L x P (MR in pure competition) P = 2 w = 100
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Optimal Employment of Factors MRPL = MR * MP L MRP L = dTR/dQ At the optimum employment of factors dTR/dQ = w
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MRP and Optimal Employment MRP L W 2 W 1 (supply of labor) MRP L (demand for labor) 0
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Ex.
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This note was uploaded on 10/28/2009 for the course EMG 3444 taught by Professor Prof.abay during the Spring '09 term at University of Great Falls.

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EMG_344-3_AEVA_Lecture-5 - Production and Technological...

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