Production With One Slop Of The Product Curve Case Study

Decent Essays
2.8. Production With One Variable Input (Labour) And Law Of Diminishing Marginal Returns
This is the situation were capital is fixed and labour is variable, and only way to increase the output is by increasing the output. amt of labour(L) capital(K) total output(q) avg product(q/L) marginal product(dq/dL)
0 20000 0 0 0
1 20000 30 30 30
2 20000 50 25 20
3 20000 80 26.66666667 30
4 20000 100 25 20
5 20000 115 23 15
6 20000 120 20 5
7 20000 112 16 -8
8 20000 100 12.5 -12
9 20000 90 10 -10
10 20000 80 8 -10

The Slop Of The Product Curve (Raymond)

In chart A the output of Raymond increased with respect to the increase in labour till a maximum level were the raw materials and space to work is up to the level (120) and
Started
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Raymond’s marginal product is positive as long as the output increases and it turns to negative. This happens because of adding a n extra worker more than the optimum level leads to negative marginal product of that labour.
And till the labour no 7 there is a small fluctuation in the production and when the marginal product curve touched average production curve the average tents to fall.
Outcome:
2.7.1 Law Of Diminishing Marginal Returns As the economic concept the Law Of Diminishing Marginal Returns also proved here. It is the data of Raymond’s one production unit’s information for one month. It repeats its cycle.

2.7.2Production with two variable input
In this concept two variables will be changing (capital and labour), were in Raymond they have done this by usage of machine and labour 1 2 3 4 5
1 20 40 55 65
…show more content…
So here also the economical concept Diminishing Marginal Returns proved.

2.7.Substitute Among Inputs
There is an equal substitution available in isoquant 2 units in capital reduction and one unit in labour addition will also provide us the same result. This proves the MRTS marginal rate of technical substitution.

2.7.1Cost of production (Raymond)
The cost of production to a company decides from the technology, method, prices of the factors of inputs and labour.
2.7.1.2 Opportunity cost of Raymond:
They are utilising the outside tailors to stich the cloth so that they can reduce the expense to employ a tailor. They are giving the space inside the showroom for the tailor so that the tailor will get work and the Raymond will get a rent.

Raymond cost output fixed cost variable cost total cost marginal cost avg variable cost avg total cost avg fc
0 50000 0 50000
1 50000 200000 250000 200000 200000 250000 50000
2 50000 225000 275000 25000 112500 137500 25000
3 50000 230000 280000 5000 76666.66667 93333.33333

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