Eco

• Demand facing


  Perfect elasticity
• Total Product


  Total quantity of goods and services produced over a period of time
• Average Product


  Measure of the output produced by unit of input
• Marginal Product


  Change in total output due to the one unit change in the quantity of input utilized
• In the short run, the price is equal to MR and ATR under a perfect market
• When labour input exceeds a certain level

  Marginal Product becomes negative
• When Average Product is at maximum

  Marginal Product is greater than Average Product
• When Average Product is falling

  Marginal Product is less than Average Product
• Diminishing Marginal Returns


  • Point A - MP reaches maximum
• Diminishing Average Returns


  • Point B - AP reaches maximum
• Three stages of production

  1. Stage 1: Increasing average returns where MP exceeds AP

  2. Stage 2: Diminishing returns where MP < AP but AP is still increasing

  3. Stage 3: Negative returns where both MP and AP are decreasing
• Stage 1 is called the "Inefficient Stage of Production"
• MR = Price


  In the short run, the price is equal to marginal revenue when the firm is a price-taker
• Marginal Cost (MC)


  The additional cost a firm incurs from producing one more unit of its product
• Average Total Revenue (ATR)


  The total revenue generated by selling a certain number of units
• Marginal Revenue (MR)


  A type of revenue that is the additional income a firm gains from selling one more unit of its product