Key Concepts

The technological relationship that shows, for every combination of the inputs, the maximum quantity of output a firm can produce with them; written in ge …

The period of production in which at least one input (typically capital) cannot be varied and so remains fixed, while the firm can still change its vari …

The period of production in which every input can be varied, so the firm has no fixed factor and can freely choose the sc …

The total quantity of output produced by a given amount of the variable input while all other inputs are held constant; also called the total return or total ph …

The addition to total product from employing one more unit of the variable input, other inputs held constant; for labour, $MP_L = \dfrac{\Delta TP}{\D …

The output produced per unit of the variable input; for labour it equals total product divided by the number of labour units, …

The principle that as successive units of a variable input are added to a fixed input, beyond a certain level the marginal product of the vari …

The tendency of the marginal product of a variable input to first rise and then fall as its employment increases relative to a fixed input, because the proportion in which the two fac …

A long-run idea describing how output responds when all inputs are scaled up by the same proportion $t > 1$: output may rise in the same proportion (constant), a greater proportion (increasing) or a smaller pro …

The relationship giving the least cost of producing each level of output, given the prices of the factors of production and th …

The addition to total cost from producing one more unit of output; in the short run $SMC = \dfrac{\Delta TC}{\Delta q}$, and it equals the change in total variable cost si …

The cost of production per unit of output; the short run average cost is $SAC = \dfrac{TC}{q}$, and it is the sum of average variable cost and average fi …