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A concept in economics that states that as additional units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease.
Also known as the Law of Diminishing Returns, it describes the inverse relationship between the input of a factor of production and the output it produces, assuming other factors are held constant.
A factor of production that remains constant in quantity during a production process, such as a factory building or a piece of machinery.
A factor of production that can be changed or varied during a production process, such as labor or raw materials.
The additional output or product that is generated by using one more unit of a variable input, while keeping all other inputs constant.
The total output or product that is generated by using a combination of inputs in the production process.
In this stage, the marginal product of the variable input increases at an increasing rate, leading to higher total product.
In this stage, the marginal product of the variable input increases at a decreasing rate, but still remains positive, resulting in a slower increase in total product.
In this stage, the marginal product of the variable input becomes negative, indicating that additional units of the variable input are reducing the total product.
A specific application of the law of diminishing marginal returns in the agricultural sector, where adding more units of a variable input, such as fertilizer, may eventually lead to lower crop yields.
A specific application of the law of diminishing marginal returns in the manufacturing sector, where adding more units of a variable input, such as labor, may eventually lead to lower production efficiency.
A specific application of the law of diminishing marginal returns in the services sector, where adding more units of a variable input, such as customer service representatives, may eventually lead to lower customer satisfaction.
The level of a variable input that maximizes the total output or product, taking into account the trade-off between the cost of the input and the additional output it generates.
Various factors, such as technology, resource availability, and management practices, can influence the extent and timing of diminishing marginal returns in a production process.
In the long run, all inputs are variable, allowing for adjustments to be made to overcome diminishing marginal returns. In the short run, at least one input is fixed, limiting the ability to overcome diminishing marginal returns.
A concept in economics that refers to the cost advantages that a firm can achieve by increasing its scale of production, often leading to a reduction in average cost per unit.
A concept in economics that refers to the cost disadvantages that a firm can experience when it becomes too large and inefficient, resulting in an increase in average cost per unit.
The additional cost incurred by producing one more unit of output.
The total cost divided by the quantity of output produced, representing the cost per unit of output.
The goal of a firm to maximize its profits by producing at a level where marginal cost equals marginal revenue.
In the short run, diminishing marginal returns can lead to higher marginal costs and lower profits if additional units of a variable input are added without adjusting other inputs.
In the long run, firms can overcome diminishing marginal returns by adjusting all inputs, allowing for cost-saving measures and increased efficiency.
A concept in economics that states that as a consumer consumes more units of a specific good or service, the additional utility or satisfaction derived from each additional unit will eventually decrease.
The satisfaction or benefit that a consumer derives from consuming a good or service.
The difference between the price a consumer is willing to pay for a good or service and the actual price they pay, representing the additional benefit or surplus gained by the consumer.
The difference between the price a producer is willing to sell a good or service for and the actual price they receive, representing the additional profit or surplus gained by the producer.
The point at which the quantity demanded of a good or service equals the quantity supplied, resulting in an efficient allocation of resources and no shortage or surplus.
A measure of the responsiveness of the quantity demanded of a good or service to changes in its price, calculated as the percentage change in quantity demanded divided by the percentage change in price.
A measure of the responsiveness of the quantity demanded of a good or service to changes in consumer income, calculated as the percentage change in quantity demanded divided by the percentage change in income.
A measure of the responsiveness of the quantity demanded of a good or service to changes in the price of a related good or service, calculated as the percentage change in quantity demanded divided by the percentage change in the price of the related good or service.
Goods that can be used as alternatives to each other, so that an increase in the price of one good leads to an increase in the demand for the other.
Goods that are typically consumed together, so that an increase in the price of one good leads to a decrease in the demand for the other.
A measure of the responsiveness of the quantity supplied of a good or service to changes in its price, calculated as the percentage change in quantity supplied divided by the percentage change in price.
A situation where the quantity supplied of a good or service does not respond to changes in its price, resulting in a vertical supply curve.
A situation where the quantity supplied of a good or service is infinitely responsive to changes in its price, resulting in a horizontal supply curve.
A measure of the responsiveness of the quantity supplied of a good or service to changes in producer income, calculated as the percentage change in quantity supplied divided by the percentage change in income.
A measure of the responsiveness of the quantity supplied of a good or service to changes in the price of a related good or service produced by the same producer, calculated as the percentage change in quantity supplied divided by the percentage change in the price of the related good or service.
A situation where the allocation of goods and services by a free market is not efficient, often due to the presence of externalities, public goods, or market power.
The costs or benefits that are not reflected in the market price of a good or service, but are instead borne by society as a whole or by third parties.
Goods or services that are non-excludable and non-rivalrous, meaning that they are available to all individuals and one person's consumption does not reduce the availability for others.
The ability of a firm or group of firms to influence the price or quantity of a good or service in the market, often due to factors such as monopoly or oligopoly.
A market structure characterized by a single seller or producer of a good or service, with no close substitutes and significant barriers to entry.
A market structure characterized by a small number of large firms that dominate the market for a particular good or service, often resulting in limited competition.
A market structure characterized by many firms that produce differentiated products, allowing for some degree of market power and competition.
A market structure characterized by many firms that produce identical products, with no barriers to entry or exit and no individual firm having market power.
The characteristics and organization of a market, including the number of firms, the nature of the product, and the degree of competition.
A measure of the extent to which a small number of firms dominate a market, often calculated using indicators such as the concentration ratio or the Herfindahl-Hirschman Index (HHI).
The percentage of total market sales or revenue that is captured by a particular firm or group of firms.
A pricing strategy where a firm charges different prices to different customers or groups of customers, often based on factors such as willingness to pay or market segment.
A type of monopoly that arises when economies of scale enable a single firm to supply the entire market at a lower cost than multiple smaller firms.
The use of laws, rules, and policies by the government to influence or control economic activities, often aimed at promoting competition, protecting consumers, or ensuring fair market practices.
Laws and regulations that are designed to promote competition and prevent monopolistic practices, such as price fixing, collusion, and abuse of market power.
Laws and regulations that are designed to protect consumers from unfair or deceptive practices, such as false advertising, product defects, or unfair contract terms.
Laws and regulations that are designed to protect the environment and natural resources, often by setting limits on pollution emissions, waste disposal, or resource extraction.
The use of government spending and taxation to influence the overall level of economic activity, often aimed at stabilizing the economy, promoting growth, or reducing inflation.
The use of central bank policies, such as interest rate adjustments and open market operations, to influence the supply of money and credit in the economy, often aimed at controlling inflation, promoting economic growth, or maintaining price stability.
The branch of economics that studies the behavior and performance of an economy as a whole, including topics such as inflation, unemployment, economic growth, and fiscal and monetary policies.
The branch of economics that studies the behavior and decisions of individual consumers, firms, and industries, and how their interactions determine prices, quantities, and resource allocation in specific markets.