ASSIGNMENT
NAME: Muhammad Hamza Zafar
REGISTRATION NO: 47875
SUBJECT: MICRO ECONOMICS
RESPECTED FACULTY NAME: DR AMENA
ANS NO 1)
(a)
Marginal product is calculated as follows -:
Marginal product = Change in total product/Change in units of labor
Question: 1: The table shows total production of a firm. If units
of labour (L) increase, find below. 2 mar...
Expert Answer
Following table shows the marginal product schedule -:
Units of
Labor
Total
Product
Marginal
Product
001 80 80
2 200 120
3 330 130
4 400 70
5 450 50
6 480 30
7 490 10
8 480 -10
(b)
Average product is calculated as follows -:
Average product = Total product/Units of labor
Following tabe shows the average product schedule -:
Units of
Labor
Total
Product
Marginal
Product
Average
Product
00-0
1 80 80 80
2 200 120 100
3 330 130 110
4 400 70 100
5 450 50 90
6 480 30 80
7 490 10 70
8 480 -10 60
(c)
Increasing returns to labor happens when marginal product increases as the units of labor increases.
The marginal product is increasing when units of labor employed increases from 1 unit to 3 units.
Decreasing returns to labor happens when marginal product decreases as the units of labor
decreases. The marginal product is decreasing when units of labor employed increases from 4 units
to 8 units. Thus,
There are increasing return to labor from the first through the third units of labor and decreasing
returns
to labor from the fourth through eighth units.
(d)
When total product is increasing, marginal product is Positive and when total production is
decreasing,
marginal product is Negative.
ANS NO 2)
1) The law of diminishing return states that: As more and more units of any factor of production are
used,
the contribution of the last factor of input to the total output keeps decreasing.
2) Yes, the above table indicates diminishing returns. Because the addition to total output by using
one
more unit of output keeps decreasing (5,4,3,2 and 1).
Ans no 3
PART (A)
ISOQUANT CURVE : - An isoquant curve is a pattern of graph which we deals in microeconomics.
This type of curve is made in "concave shaped" on graph. It covers specific level of output for all
factors or inputs. Here, the most common inputs are capital and labor. The various combinations of
these inputs provides the same level (or amount) of output or say production.
. The following table shows three different
combinations of capital (K) and labour (L), as [(K1+...
INDIFFERENCE CURVE: - An indifference curve is that concept in economics which explains the
different combination of two goods for getting the equal satisfaction and utility by the consumer,
and thus making the consumer indifference. In this curve, we can observe the consumer will get
equal preference for the given combinations of goods shown. Generally, with respect to origin, the
"indifference curve is convex" and also the "two indifference curve will never intersect each other".
PART (B) GIVEN : We are provided a table which shows different combinations of capital (K) and Labor (L), like
[(K1+L1);
(K2+L2); (K3+L3)]
K1 LI K2 L2 K3 L3
A
1 8 2 10 3 10
B 253647
C 334455
D 526374
E 8 1 8 2 10 3
PART (C) TO FIND : - Draw three Isoquant curve by using these three combination of labor and
capital, and
explain each indifference curve: PART (D) SUGGESTED SOLUTION : For combination (K1 + L1) : Given Table Data: K1 LI
A 18
B 25
C 33
D 52
E 81
For Combination (K3 + L3) : Given Table : K3 L3
A 3 10
B 47
C 55
D 74
E 10 3
Required Graph : Combination of three options : Given Table : K1 LI K2 L2 K3 L3
A 1 8 2 10 3 10
B 253647
C 334455
D 526374
E 8 1 8 2 10 3
]
Explanation : - As we can see the I have drawn a separate graph for each three combinations. In this
combination, we can see that the different combination of the two inputs i.e Capital (K) and Labor
(L)
provides the same utility and satisfaction level for the consumer. And in the last graph we can see
that these combinations are drawn in the same graph. They are not intersecting at any point. So the
given points on these curve lines provides the same satisfaction level for the given consumer. Here
the consumer is indifferent at different point as he has different options and all these options are
providing the same level of satisfaction. The indifference curve (K1 + L1) lies most below part, the
indifference curve (K2 + L2) lies just above the (K2 + L2). These "Indifference curves are
downward
sloping".
Conclusion : - From above explanation and the drawn graphs, we conclude that the different
combinations
of these three cases i.e (K1 + L1), (K2 + L2) and (K3 + L3) provides the same satisfaction level for
the same