Lecture 1 Notes, Production 1 Short Run
In the short run, the capital input is fixed, so we only need to consider the
change of labor. Therefore, the production function
q = F(K,L) has only one variable L
Average Product of Labor. APL
Chidinma Krystal Ubani
13 February 2017
As import prices are rising, so are the prices for oil and other commodities as such.
Energy products costs, such as fuel, in the U.S. increased more than anticipated just this past
Lecture 3 Notes, Cost Function
Let w be the cost per unit of labor and r be the cost per unit of capital. With
the input Labor (L) and Capital (K), the production cost is
w L + r K.
A cost function C(q) is a function of q, which tells us what the minimum
Lecture 6 Notes, Competitive Analysis
Long Run Competitive Equilibrium
, an existing rms marginal cost and average total cost are SM C and SAC.
The short-run market price is 7, so existing rms are making prots. In the long
run, capital can be changed; o
Lecture 5 Notes, Profit
For perfect competition in a product market, we make some assumptions:
Price taking: either individual rms or consumers cannot aect the price.
Product homogeneity: product of all rms are perfect substitutes.
Lecture 2 Notes, Scale and Derivation
Returns to Scale
Constant Returns to Scale
Doubling the inputs leads to double the output:
Q(2K, 2L) = 2Q(K, L).
One big rm is as good as many small rms.
Isoquants are equally distant apart
Decreasing Returns to
Lecture 7 Notes, Tax
Agricultural Price Support
In this case, government sets prices higher than the free market level, and buys
excess supply The buyers price is shown on the y-axis in the following
graphs. The original consumer surplus equals the area
Lecture 10 Notes, Production Possibilities
Production Possibilities Frontier
Marginal rate of transformation (M RT ):
How much clothing must be given up to produce one additional unit of
The absolute value of the slope of the production possibil
Lecture 8 Notes, Subsidy
The buyers price is shown on the y-axis. The consumer surplus
and producer surplus both decrease:
CS = (A + B),
P S = (C + D).
G = A + C.
So the deadweight loss is
DW L = B + D.
The burden of a tax is shar
Lecture 9 Notes, Efficiency
In the Edgeworth box given endowment E, the area between As and Bs utility
curves contains all benecial trades, but not all are ecient; that is to say, both
A and B are better o in this area, but they will ke
Lecture 4 Notes, Long and Short Run
Relation Between Long Run Cost Short Run
Since rms can change capital in the long run, the long run cost is always no
more than the short run cost:
CL R(q) CSR,K (q).
Figure 1 shows three short-run total cost giv
One example of a price floor is the current price floor on agriculture goods by trading blocs such
as the European Union (EU). It protects their agricultural sector and keeps the price and cost of
agriculture above the equilibrium price. The stated goal o