22 analyze the relationship between productivity and

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2.2. Analyze the relationship between productivity and the cost of production. (Chapter 11, 17) Productivity is the measure of output, like products, from a production process per unit of input, like labor and capital. Productivity is a ratio of output to inputs as it measures how efficiently production inputs like labor are used to produce a given level of output. Factors of the cost of production is fixed costs, variable costs, and total costs. Fixed cost are costs that are spent and cannot be changed in the period of time under consideration (Colander, 2013). Variable costs is costs that change as output changes and total cost is the sum of the fixed and variable costs (Colander, 2013). In the long run all inputs are variable and in the short run some inputs are fixed (Colander, 2013). A company can expand the output of the business when more variable factors like labor and capital is employed. For example, a company can employ more workers and utilize technology to grow the company. As variable costs increase the output increases. It does not matter the level of production a fixed cost will remain the same. Colander, D. (2013). Economics (9 th ed). New York, NY: McGraw Hill Teacher Response: xxxxx, there is a precise relationship that can be directly identified as it is manifest between changes in productivity and changes in the average variable cost of production. What is this relationship, and what does this underlying relationship imply about how productivity influences the cost of production? My response: The cost of production is the total of costs that is associated with the production of a product. This cost include variable cost. The cost to produce additional quantity of products produced is depended upon the output from the labor because you pay workers and get output as a result of employing them. In the short run, output can be raised only by increasing the variable input. When marginal productivity falls, marginal cost must rise, and when average productivity falls, average variable costs must rise (Colander, 2013). If productivity is low the cost of production is high. If
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productivity is high the cost of production is low. So, when you say productivity falls you are basically saying that costs rises (Colander, 2013). Colander, D. (2013). Economics (9 th ed). New York, NY: McGraw Hill Teacher Response: "So, when you say productivity falls you are basically saying that costs rises." In other words, there is an inverse relationship between changes in productivity and changes in the cost of production. 2.3. Analyze the effect of changes in the supply of and demand for factors of production on the price of inputs. (Chapter 12) . According to the text the connection between cost and supply is the revenue received for a good must be greater than the planned cost of producing it (Colander, 2013). Factors of production are inputs used to produce a product. The cost of production is impacted by a change in the cost of an input which will shift the supply curve. If the cost of production is low the company’s profits increase. If the cost of production decreases the shift will be outward. The company will supply
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