Econ team essay

Week two’s objective discussed about interesting topics that have challenge each members in different ways. The objective of week two’s topics discusses the connection between the amount of inputs and the law of diminishing marginal productivity. Moreover, it consists of production and cost analysis. Each individual are required to analyze the relationship between productivity and the cost of production. Furthermore, the objective analyzed the effect of changes in the supply of and demand for factors of production on the price of inputs. Through this weeks objective, each member were able to take the information they obtained and refer it to their own understanding of the material through reference to their field.

Through chapter 12, the law of diminishing marginal productivity at times is referred as the flowerpot law. The reason being is that if it doesn’t “ hold true, the world’s entire food supply could be grown in one flowerpot. ” (Colander, 2010) The law of diminishing marginal productivity states that with the addition of variable input being add to a fixed input, the additional output that firm acquire will ultimately crease. For instance, a factory has room for so many people.

As we exceed that amount, everything will simply be cluttered and the ration of workers compared to productivity will simply decrease to the point of diminishing absolute productivity. The relationships amongst productivity and the cost of production are the cost per day or the cost per hour associated to the productivity achieve within that day. In examining the two together, the productivity, which is the output for the total hours worked, is being compare to the total cost. This will show how much need to be made, and the total cost to make a product in order to reach a break-even analysis.

Moreover, technological innovation leads to an improvement in productivity, which will have the effect on the cost of doing business or the activity, and will affect the prices of related inputs. A concept that some members found a bit challenging to understand was recognizing the effects of changes in the supply of and demand for factors of production on the price of inputs. Controversy was surrounding whether or not the rice of inputs were considered the price of goods or the wages that an employee is paid.

However, each member were able to take a more objective look at fixed costs versus variable costs for a business and how it affects overall productivity and profit. Variable costs change depending on the output of the company while fixed rate costs do not change despite the quantity of the output. Companies with high fixed costs can be higher risk investments for people because when sales drop, profit margins tend to take a considerable dive. The fixed costs still have to be paid, despite the lack f output. Fixed costs are an important part of profit projections. We learned that the relationship between the different types of costs is crucial element for business planning. The decision to use automation versus physical labor for production can benefit or hinder success for a company. Furthermore, company managers must consider how their decisions (whether as a response to uncontrollable environmental elements or as an initiative to maximize revenue after all costs), will affect their ability to meet demand for their product.

Cost analysis provides for a specific breakdown in cost, and benefits a company greatly. No operational decision can be properly made without the knowledge of what it cost to produce a single unit and the relationship of cost and marginal revenue. Through this weeks objective, there were struggles for some members as each members attempts to refer the objectives obtain into their work experiences, and or fully grasp the knowledge of why something occur, however, through the team discussion, each member is able to understand the objective much clearer.