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
#question#.problems and its solution of microecnomics


What are the causes of emergence of monopoly?

Structure of the IMF: The Central office of the IMF is in Washington DC, USA. It has 184 members. It is affiliated to the UNO. The highest authority of the IMF is the Board of

Exercise on Demand, supply and market equilibrium Given the following determinants of demand and supply, briefly explain, using appropriate diagram, the nature of relationships be

Assume that a persion lives for three equal periods: Youth, Early Adulthood and Late Adulthood. The person dies after later adulthood period ends. If one invests $200 in educatio

Durability of the Commodity: With some commodities, we require one at a time and they are used for a very long time before they get spoilt. Examples of such goods are cars, tele

economic problems are faced by all types of economies but they are dealt with differently in different types of economies.discuss

STRUCTURE OF NATIONAL INCOME: The structure or composition of national income of an economy explains the relative significance of the different producing sectors in an economy

Lab Exercise 1. Taco Del Mar has completed a study of weekly demand for its tacos in Washington State's regional markets.  The study developed the following demand function: Q =