by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Production Technologies? In planning for the long run, the firm will compare alternative production technologies (or processes). In this context, technology refers to all alternative methods of combining inputs to produce outputs. It does not refer to a...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Average Variable Cost?The cost of producing a firm’s output depends on how much labor and physical capital the firm uses. A list of the costs involved in producing cars will look very different from the costs involved in producing computer software or haircuts...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Cost Function? A cost function is a mathematical expression or equation that shows the cost of producing different levels of output. What we observe is that the cost increases as the firm produces higher quantities of output. This is pretty intuitive,...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Factor Payment? For every factor of production (or input), there is an associated factor payment. Factor payments are what the firm pays for the use of the factors of production. From the firm’s perspective, factor payments are costs. From the owner of each...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Marginal Product? We should also introduce a critical concept: marginal product. Marginal product is the additional output of one more worker. Mathematically, Marginal Product is the change in total product divided by the change in labor: MP = ΔTP /...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Fixed Inputs? We can describe inputs as either fixed or variable. Fixed inputs are those that can’t easily be increased or decreased in a short period of time. In the pizza example, the building is a fixed input. Once the entrepreneur signs the lease, he or...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Factors of Production? Economists divide factors of production into several categories: Natural Resources (Land and Raw Materials) – The ingredients for the pizza are raw materials. These...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Substitution Effect? The typical response to higher prices is that a person chooses to consume less of the product with the higher price. This occurs for two reasons, and both effects can occur simultaneously. The substitution effect occurs when a price...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What Factors Affect Demand? The following factors often affect the demand for a product: Taste Shift Change in Population Change in Income Change in Price of Substitute Goods Change in Price of Complementary Goods Future Expectations of Financial Position A change in...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What Affects Supply? Supply is made up of what producers bring into the market for consumers to purchase. As such, numerous factor can affect the supply or amount of production. The factors of production known to shift the supply curve include: Production costs...
