by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Production Function? We can summarize the ideas so far in terms of a production function, a mathematical expression or equation that explains the engineering relationship between inputs and outputs:Q = f ⎡NR, L, K, t, E⎤The production function gives the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Long Run Average Cost? The long-run average cost, is the cost that it costs (on average) to produce a single unit of output (at any given level of production). Basically, it is the cost of producing a common-sized, batch of goods over time. This cost is...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Long-Run Average Supply (LRAS)?The Long-Run average supply curve shows the relationship between price level and real GDP if all prices (including nominal wages) were fully flexible. Note: In the long-run supply curve, the price can change along the curve, but...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Allocative Efficiency? Allocative efficiency refers to the combination of goods (or services) produced is the optimum quantity desired by society as a whole. It is a specific point along the production possibility frontier (curve). Related Topics Budget...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Marginal Cost? Marginal cost is the additional cost of producing one more unit of output. It is not the cost per unit of all units produced, but only the next one (or next few). We calculate marginal cost by taking the change in total cost and dividing it by...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Average Total Cost? Average total cost (sometimes referred to simply as average cost) is total cost divided by the quantity of output. Average total cost starts off relatively high, because at low levels of output total costs are dominated by the fixed cost....
