Eco365 Wk 2 Reflection

Production and Cost Analysis Reflection

Sarah Wheeler

ECO/365

April 29, 2013

Spyridon Patton

University of Phoenix

Production and Cost Analysis Reflection

In week two, a variety of topics were discussed. Each member of Team ‘E’ chose a topic he or she was either comfortable with, struggled with, or that related to his or her workplace. The topics chosen included topics from this week’s objectives. Members of Team ‘E’ discussed the law of diminishing marginal productivity, productivity and the cost of production, supply and demand effects of the price of inputs, and changes in marginal revenues.

According to Colander, the law of diminishing marginal productivity states that as more of a variable input is added to a fixed input, the additional output one gets from additional input will decrease (2010). Variable input is a piece of production, which may be altered in the short run by a firm as it seeks to change the quantity of output made. A fixed input is a factor of production that cannot change in the short run by a firm when it seeks to change the quantity of output made. Average and marginal product are terms that describes a relationship between a firm’s inputs and outputs. The average product is the total output divided by the quantity of input (Colander, 2010). For example, assuming labor is used as input, if a company produced 10 television sets a year, the average product would be one television set per year. The marginal cost is the additional output approaching from an additional input (Colander, 2010).

Productivity is how much work can be produced within a given time span. For example, in one of the member’s profession as a house cleaner, the crew has a certain number of hours to spend cleaning a house to meet the profit margin. For instance, in an eight hour day of cleaning, the crew managed to get two houses complete, the productivity would average one house per four hours.

There are various...