Agenda
- Arc Curve U-shaped
- Short Run and Long Run
- Economics of Scale
- Diseconomies of scale
Not related ig!!
- The U-shaped curve is a mathematical concept that describes the graph of a quadratic equation, where the curve is shaped like a U if the leading coefficient is positive and opens upward.
- In economics, the U-shaped curve is often used to describe the relationship between a variable and its effect on another variable, such as taxation and government revenue, or inflation and unemployment.
- At low levels of the independent variable, increasing the dependent variable will have a positive effect, but at high levels of the independent variable, increasing the dependent variable may have a negative effect.
- The U-shaped curve helps us understand how variables change over time and how they affect other variables, and it is a useful tool in mathematical and economic analysis.
| Mathematical |
Economical |
| Steep Slope |
Law of diminishing returns |
| Cost is high, output is low, As the slope flattens cost declines and output increases |
When $Mc$ is minimum $M_p$ is maximum and arc is minimum with optimum output |
| When the average mathematical curve rise it is beyond the scope of producer to retain business and cost again rises |
|
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💡 Marginal cost is cost of producing extra unit
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💡 Marginal Product is the extra unit of the product
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Short Run vs. Long run
| Short Run |
Long Run |
| Steep Slope |
Long run all resources are variable |
| Fixed Resources , Variable Resources |
Are variable technologies , land, labor |
| Technologies and land are fixed |
|
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💡 Economies of scale reflects a firm goes from mass production at minimum cost
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💡 Labor Specialization, Best management model efficient capital
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