Flashcards in Foundations of Economic Analysis: Supply Deck (5)
What is the diminishing marginal product?
If increasing quantities of labour are applied ceteris paribus to producing a good then the additional amount produced by each additional labourer (called the marginal product) will eventually decrease.
What is supply related to?
The current price of the product
The prices and quantities of factors of production
The current state of technology.
Using a ceteris paribus assumption what is the formula that we use to concentrate on current price?
Qs = g (P)
If output increases, what should we therefore expect?
As output increases, with given technology and prices of inputs, then we can expect costs to rise for each additional unit of output.