Dynamic changes in costs: the learning curve, Microeconomics

Dynamic Changes in Costs: The Learning Curve

*  The learning curve measures impact of worker's experience on costs of production.

*  It describes relationship between a firm's cumulative output and amount of inputs required to produce a unit of output.

455_learning curve.png

2485_learning curve1.png

* If N=1

- L equals A + B and this measures labor input to produce the first unit of output

-   If β = 0

- Labor input remains constant as the cumulative level of output increases, cause there is no learning.

* If β > 0 and N increases

- L approaches A, and A represent minimum labor input unit of output after all learning has taken place.

-   The larger β:

- The more important becomes the learning effect.

404_learning curve2.png

* Observations

  1) New firms can experience learning curve and not economies of scale.

 2) Older firms have small gains from learning.

Economies of Scale Versus Learning

1650_learning curve3.png

* The learning curve implies:

 1) The requirement of labor falls per unit.

 2) Costs will be high at 1st and then will fall with learning.

 3) After eight years the labor requirement will be 0.51 and per unit cost will be ½ what it was in the 1st year of production? 

653_learning curve4.png

Posted Date: 10/12/2012 4:04:01 AM | Location : United States







Related Discussions:- Dynamic changes in costs: the learning curve, Assignment Help, Ask Question on Dynamic changes in costs: the learning curve, Get Answer, Expert's Help, Dynamic changes in costs: the learning curve Discussions

Write discussion on Dynamic changes in costs: the learning curve
Your posts are moderated
Related Questions
Briefly discuss the components of macroeconomics system with suitable explanation


Describe Dalton''s law of partial pressures, specification of Dalton''s law of partial pressures, Dalton''s law states that, at a given known temperature total pressure exerted b

#how do you draw a demand curve on excel


How many hours will an individual allocate to leisure if their indifference curves  between consumption goods and leisure are concave to the origin? Show in figures and explain in

Document Design It refers to the overall "look" and design rather than the content of a document. Specific elements such as white space, limited paragraph indentations, length

Purpose: this case is intended to model supply chain, especially the reverse logistic behaviour. Description: In Cal Poly Pomona, TOM301 (Operations Management) is a core cou

How does the approach of someone who has adopted the precautionary principle differ from someone with a blind faith in substitutability, when it comes to a non-renewable resource l

What is Game Theory?  Game Theory is a mathematical method of decision-making in which a competitive situation is examined to verify the optimal course of action for an interes