Learning Objective: Today I will be able to determine when law of diminishing returns takes hold by counting golf balls. Agenda Learning Objective Lecture: Ch. 5.3 Law of Diminishing Returns The Law of Diminishing Returns of Golf Balls Reflect Exit Slip

Title Notes Ch. 5.3 Law of Diminishing Returns Output=goods & services input= productive resources

Fixed Resources Variable Resources Short-Run Long-Run Resources that cannot be changed. Ex. Building, land, etc. Variable Resources Resource that can easily change output. Ex. Workers, natural resource (cotton, crude oil, etc.) Short-Run At least 1 resource is Fixed Long-Run ALL resources are variable

Total product Marginal products Total output of the firm The amount of the total product changes w/ each additional worker Total amount of produced by the firm In other words it is the Total Product minus the New Total Product after adding one worker. -- The difference from the Total product and the new Total Product after adding one worker. Ex. Moving company “Uhaul” moves furniture. Their total output is the amount of tons moved per day. Their Marginal Product is amount that total product changed after hiring one more worker.

Check for Understanding What are outputs? What are inputs? What is a Fixed resource? Provide an example. What is a Variable resource? Provide an example. At the Short-Run, are resources fixed or variable???? What about at the Long-Run? What is Total Product??? What is Marginal Product???

Law diminishing returns Marginal product increases when as labor is added, it’s called Increasing Returns. (When the difference between total product and new total product increases) Law diminishing returns Occurs when adding units of labor increase total product by smaller amount. Marginal product begins to decrease while total product still increases **** important feature at short-run Increasing returns Law of diminishing returns In other words, law diminishing returns states at adding workers increases Total Product, but it will get to a point where it increases less.

3 Ranges of Marginal Product Increasing marginal product Marginal Product Increases & Total Product increases Diminishing but positive marginal returns Marginal Product Decreases & Total Product increases Negative marginal returns Marginal Product Decreases & Total Product now becomes negative (can’t produce) Too many cooks spoil the broth!!!!

Check for Understanding After what # of workers does the co. experience increasing returns? After what # of workers the co. experience Law of Diminishing Returns? After what # of workers does it experience negative marginal returns?

Law of Diminishing Returns for Golf Balls Total Product Units of the Variable Resources Marginal Product   Directions: Fill in each box, every time we add labor.

Reflect Answer the questions on your sheet.

Exit Slip Based on the activity, how many units of variable resources should we stop at?