Who can make paper footballs the fastest? Warm Up: How does a producer come up with the price he/she charges for a product?

Recopy this chart in your notes: # of workers # of paper footballs Extra Footballs Questions to answer with your group: 1. Will adding workers always increase output? 2. What would have helped your group be more productive?

Can there be too much of a good thing? Remember the marshmallow experiment? Remember the marshmallow experiment? –As consumers, we achieve utility when we consume one unit, marginal utility when we consumer an additional unity, but eventually we will reach diminishing marginal utility when we have consumed too many –The same idea applies to entrepreneurs hiring workers; there is a limit to how many should be hired!!

THE THEORY OF PRODUCTION The belief that there is a RELATIONSHIP between the FACTORS of production [inputs] and the OUTPUT of goods and services. The belief that there is a RELATIONSHIP between the FACTORS of production [inputs] and the OUTPUT of goods and services. TOTAL PRODUCT: the total OUTPUT produced by a firm TOTAL PRODUCT: the total OUTPUT produced by a firm

THE PRODUCTION FUNCTION A CHART or GRAPH that describes the relationship of changes in output to the different amounts of inputs. A CHART or GRAPH that describes the relationship of changes in output to the different amounts of inputs.

MARGINAL PRODUCT The EXTRA product, or CHANGE in total product, when an extra input is added. The EXTRA product, or CHANGE in total product, when an extra input is added.

Have out your homework Attach the ½ sheet into your notebook using tape or stapler. Attach the ½ sheet into your notebook using tape or stapler. MARKET CAKE DAY!!! MARKET CAKE DAY!!!

# of WorkersTotal ProductMarginal Product

STAGES OF PRODUCTION In either the chart or on the graph, there are three distinct stages of production: In either the chart or on the graph, there are three distinct stages of production: illustrate the PROGRESSION of production as WORKERS are added. illustrate the PROGRESSION of production as WORKERS are added.

The Three Stages of Production: 1. Increasing Returns – marginal product is POSITIVE and INCREASING. 2. Diminishing Returns – marginal product is POSITIVE, but DECREASING. 3. Negative Returns – duh.

# of WorkersTotal ProductMarginal Product Stages of Production

# of WorkersTotal ProductMarginal Product Stages of Production

Law of Variable Proportions Output will change as one input is varied while all others are held constant. Output will change as one input is varied while all others are held constant. According to our experiment: Changed Input: Changed Input: –workers Constant Inputs: Constant Inputs: –Time, paper, space, instructions, What tools would have made our production more efficient?

Top Ten Least Populated States 10. New Hampshire 9. Hawaii 8. Rhode Island 7. Montana 6. Delaware 5. South Dakota 4. Alaska 3. North Dakota 2. Vermont 1. Wyoming