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.
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