Wheat production per year from a particular farm (tonnes)

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Wheat production per year from a particular farm (tonnes)

Wheat production per year from a particular farm Number of farm workers (L) Tonnes of wheat per year TPP Tonnes of wheat per year Number of farm workers (L)  TPP = 7  L = 1 MPP =  TPP /  L = 7

Tonnes of wheat per year TPP Tonnes of wheat per year MPP MPP =  TPP /  L Number of farm workers (L) Number of farm workers (L)

SHORT-RUN THEORY OF PRODUCTION Long-run and short-run production: – –Here changing only one factor of production at a time The law of diminishing returns Fixed and variable factors Fixed Factors: – –Factory – –Equipment Variable Factors: – –Labour – –Raw materials, electricity etc Long-run and short-run production: – –Here changing only one factor of production at a time The law of diminishing returns Fixed and variable factors Fixed Factors: – –Factory – –Equipment Variable Factors: – –Labour – –Raw materials, electricity etc

Wheat production per year from a particular farm Tonnes of wheat per year TPP Tonnes of wheat per year APP MPP b b d d Number of farm workers (L) Number of farm workers (L) Slope = TPP / L = APP c c

Wheat production per year from a particular farm Tonnes of wheat per year TPP Tonnes of wheat per year APP MPP APP = TPP / L Number of farm workers (L) Number of farm workers (L)

Relationship between average and marginal If the marginal is above the average,If the marginal is above the average, The average risesThe average rises If the marginal is below the average,If the marginal is below the average, The average fallsThe average falls If the marginal is the same as the average,If the marginal is the same as the average, The average stays the sameThe average stays the same

Relationship between average and marginal Ballroom Dancing Scores

Relationship between average and marginal Cricket Averages

TPP tells us about Production PossibilitiesTPP tells us about Production Possibilities And MPP tells us the effect of hiring more workersAnd MPP tells us the effect of hiring more workers But need to translate production information into costs per unit of production.But need to translate production information into costs per unit of production. That way can compare cost of producing with revenue (price) from selling.That way can compare cost of producing with revenue (price) from selling.

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