Module Unit 2 Managerial Economics

Document Sample
Module Unit 2 Managerial Economics Powered By Docstoc
					             Module Unit 2
          Managerial Economics

                       Production Cost Relationship


                          Production function
                         Mapping of (K,L) inputs


   MES scale               Economies of scale         AP measure of productivity
Capacity constraints       Economies of size            Check:: AVC = 1/AP
                        Global economies of scale
     Key Learning Points Unit 2
• Focus on productivity        • Understand short and long
  measure, AP = q/L.             run costs defined by time
• Check the geometry of the    • Understand management
  curves                         trying to control costs
• Intuition:Product and cost     during production process
  curves are inverse           • Example: workers on
• Example: AVC = 1/AP:           fixed contract or ordering
  costs rise because of          raw material inputs on
  falling productivity.          futures market
           Unit 2: Summary
• Case studies provided during the Workshop
• In Unit 4 look for the Cases marked up as
  Production & Costs
• Read Critical Essays No 3 and 4
• Read Briefing Notes on Capacity in
  Production
• Allow the geometry to inform your intuition
  on costs and production.