company to use the factors of production to meet a certain ratio between variable and fixed factors.That is an arbitrary increase in the number of variables in relation to the same constant will cause the termination of increasing returns.A further violation of the proportion may even stop the return of factors of production.It comes into effect the so-called law of diminishing returns.
consider how to change the impact of resources (variable factor) in the short run, when a part of the factors of production remains the same as in the short term the firm is not able to change the scale of production, purchase new equipment, build workshops.
Assume that the firm uses only one variable factor - labor.Returns to labor - productivity workers.With the gradual loading of existing equipment first output will increase rapidly, then, is working not to be missed for an absolute load of equipment, growth will slow down.In the event that the firm will continue to hire new workers, they can not add anything to the already the established volume production.As a result, workers in the company will be so many that they will just get in the way, and the output will be reduced.
marginal product - is to increase production by increasing the variable factor of production per unit.In the example we considered marginal product of labor will be an increase in output due to the hiring of an additional employee shop.If you look at a graph of the volume of production from the growing number of workers, the first increase in production will go very quickly, and then it will start to slow down.Finally, with continued growth in the number of workers will increase in the negative.
but primarily in its activity, the company is faced not with the physical number of factors, and their monetary value.The marginal product of a factor of production in the form of money - a general increase in income levels through the use of an additional unit of pull factors of production.The number of all the other factors of production remains constant.For each resource, the marginal product of cash is calculated as the product of the marginal revenue for a particular level of production and volume of the marginal product.
That is, the employer is not interested in the number of workers, and the change in wages.How will change the marginal cost per additional unit of output?
Increased costs associated with producing one more unit of output, ie the ratio of total growth to the increase in variable costs of production are called variable costs.Thus, the concept of "marginal product" and "variable costs" are quite similar.
An increase in production costs can vary:
- evenly, that is, the marginal costs are constant.
- With the acceleration when with increasing marginal cost of production volumes increase.
- With the slowdown, when the company reduced costs with growth in output.
As a result, we can conclude that the marginal product and marginal cost are crucial in deciding on attracting additional unit of resource.That is, the company will be unprofitable to attract, for example, the ninth and tenth of the workers.Since nine working longer will provide a gain of manufacture, and the tenth will begin to interfere with all the others.If the goal is to further increase the output should be increased and other factors of production, for example, to buy equipment.
