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Summary ECO2003F UCT
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It is important to note that in the short run we belied it as aperiod of time in which the labour input is variable bat the
capital input is fixed
The production function
Q FCK oh Hh e m
s
capital thabon
Things to note
I It passes through the
origin which means no output if there is no variable
Intrally the graph increases
specialisation
3 But at some point the law of diminishing marginal retens
Sets in
, Marginal Product
mph DQ
oh
hole Continuous MP the slope of the tangent
line at
any given
Discrete mp the slope of the line
joinning
2 points on the TP carve
Average Product also known as Labour productivity
the slope of the from the to
ray origin
point on the TP carve
any
AP
AP is
represented as the slopes from
joining
the with a
origin corresponding point
Final note Relationship between MP AP
MP AP Average product is
rising
MP LAP is falling
Average product is
MP AP Average product is at a maximum
Intuitely if the contribution to output of an additional unit of the
variable inputs exceed the average contribution of
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