Class 12th Economics - Production and Cost Case Study Questions and Answers 2022 - 2023
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Production and Cost Case Study Questions With Answer Key
12th Standard CBSE
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Reg.No. :
Economics
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Average Product (AP) refers to the output per unit of variable input.\(\mathbf{A P}_{\mathrm{L}}=\frac{\mathrm{TP}_{\mathrm{L}}}{\mathrm{L}}\) , where L stands for labour.
Marginal Product (MP) refers to the change in the output per unit of change in the input when all other inputs are held constant (here capital is held constant).
\(\mathrm{MP}_{\mathrm{L}}=\frac{\text { Change in Output }}{\text { Change in Input }}=\frac{\Delta \mathrm{TP}_{\mathrm{L}}}{\Delta \mathrm{L}}\)
Δ represents the change of the variable showing their relationship graphically, the MP curve looks like an 'inverse V-shaped curve'. AP curve is also inverse 'U-shaped curve'.
As we increase the amount of input-labour, the MP rises. AP being the average of MP also rises but rises less than MP.
Then after a point MP starts falling. However as long as value of MP remains higher than the value of AP, AP continues to rise.
Once MP has fallen sufficiently its value become less than AP and AP also starts falling.
(a) Define MP and comment on the shape of MP curve.
(b) Explain the relationship between MP curve and AP curve.
Case Study
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Answers
Production and Cost Case Study Questions With Answer Key Answer Keys
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(a) Marginal Product (MP) is defined as the change in the output per unit of change in the input, when all other inputs are held constant.
\(\mathrm{MP}_{\mathrm{L}}=\frac{\text { Change in Output }}{\text { Change in Input }}=\frac{\Delta \mathrm{TP}_{\mathrm{L}}}{\Delta \mathrm{L}}\)
where Δ represents the change of the variable. MP curve looks like an 'inverse U-shaped curve'.
(b) While ana lysing the relationship between the MP curve and AP curve we observe:
1. As we increase the amount of input, the MP curve rises. AP curve also rises but rises less than MP curve.
2. Then after a point MP curve starts falling. However as long as value of MP remains higher than the value of AP, AP continues to rise, i.e., AP curve rises.
3. Once MP curve has fallen sufficiently its value becomes less than AP and AP curve also starts falling.
