Download ECO/365 Version 4 Principles of Microeconomics

LEARNING TEAM WEEKLY REFLECTION
1
ECO/365 Version 4
Principles of Microeconomics
Learning
Team Reflection
Paper:
Discuss this week’s objectives with your team. Include the topics you
feel comfortable with, any topics you struggled with, and how the topics
relate to your field.
Production
and Cost Analysis
Prepare a 350- to 1,050- word paper detailing the findings of your
discussion.
Learning Team Weekly Reflection
There were many objectives in week two that related to each of the team member’s personal
experiences within our field. Understanding and analyzing certain relationships such as number
of inputs and the law of diminishing marginal productivity and relationships between
productivity and the cost of production are very important to know and understand as we all have
experience in some form associated with the objectives listed this week. Supply and Demand is
an everyday occurrence in our professional occupations and the economic model of price
determination in a market.
LEARNING TEAM WEEKLY REFLECTION
2
Inputs and Law of Diminishing Marginal Productivity
Productivity is the output per number of hours worked. A car washing service for example
can detail approximately 8 cars in 8 hours. This means that the productivity rate for the service
is one car per hour. The cost of production, are expenses faced by a business when producing a
good or service for a market. The total cost is made up of fixed and variable costs. Fixed costs
can include things such as insurance charges, marketing costs, and staff salary costs. The
variable costs vary directly with output and would be the one that influences the relationship
between productivity and the cost of production. Variable costs can include things such as labor
costs and the cost of raw materials. Productivity and costs monitors inflationary trends in wages
that usually affects trends of inflation in other areas.
Productivity and Cost of Production
Cost of production is categorized in three areas – fixed costs, variable costs, and total costs.
The effects on costs differ as fixed costs remain the same price during production. Variable
costs tend to change during production and total cost is the fixed and variable costs combined
during production. The first relationship with productivity and the cost of production is that the
long run decisions are associated with variable costs and short run decisions associated with
fixed costs. According to Colander, D. (2010) “In the long run, all inputs are variables; in the
short run, some inputs are fixed.”
Marginal cost is another significant cost that occurs when there is a change by one of the
units. Marginal cost is the increase (decrease) in total cost from increasing (decreasing) the level
of output by one unit. Marginal cost can be analyzed when comparing cost and productivity on a
graph. It is common for cost graphs to have the same curve as production graphs. When the
curves intersect with marginal cost, it results in being the minimum of the average cost curve.
LEARNING TEAM WEEKLY REFLECTION
3
Effect of Change in Supply and Demand
When the supply for inputs goes down the prices are going to go up. This is due to the fact
that they are going to want more money from the countries for the inputs. When supply is low
but demand stays high those countries will still buy. Oil for gasoline is a great example. The
price is constantly rising but countries continue to purchase the goods. They just raise the price
to the people in order to compensate for the rising costs. Some team member’s struggled finding
all the information on this subject and other subjects relating to this week’s objectives. There
was a lot of information being thrown at us to take in.
Effect of Change in Marginal Revenues and Cost
Marginal revenue and marginal cost are key concepts to understand. A furniture retailer is a
good example. Furniture is bought from various furniture suppliers. Orders are placed for
products based on a predetermined purchase price. The marginal revenue is equal to the set
purchase price. The marginal revenue for the supplier does not change until a new contract is
negotiated. Marginal cost equals the supply curve. The curve represents the quantity the can be
produced at a given price. Marginal revenue from the retail side is equal to the selling price of
an item. The profit-maximizing level of output occurs when marginal revenue equals marginal
cost. If the marginal cost to produce or sell one more item is higher than marginal revenue,
money is lost. More is not always the best option especially from an economists view point.
In closing, each of the concepts given this week was very helpful to understand the
maximization of a business. This includes the amount of workers, input goods, and output goods
needed to receive the optimum net profit that is available. Each topic helped the team members
grasp the concept that sometimes more does not always mean it is better. It is important to learn
LEARNING TEAM WEEKLY REFLECTION
4
this relationship to "lean" the process and receive the most out of production without any wasted
costs involved.
References:
Colander, D. C. (2010).Economics (8th ed.). New York, NY: McGraw-Hill.