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Economics Lecture Eight (view source)
Revision as of 01:36, October 28, 2009
, 01:36, October 28, 2009→Example 1: Economic Insights into Politics: completed
The concept of "marginal product" is useful here. You need to allocate your inputs in order to maximize your output. If you put all your volunteers and money into mailings, then you won't influence people as much as if you could speak with them. But mailings reaches more people more cheaply. Perhaps you'd allocate your capital and labor on a little of each: some on the phone, some door-to-door, some mailings, and some putting up signs. That's what most campaigns do. It's hard to know if your allocation of inputs to tasks is optimal to maximize output.
The concept of "marginal product" is useful here. You need to allocate your inputs in order to maximize your output. If you put all your volunteers and money into mailings, then you won't influence people as much as if you could speak with them. But mailings reaches more people more cheaply. Perhaps you'd allocate your capital and labor on a little of each: some on the phone, some door-to-door, some mailings, and some putting up signs. That's what most campaigns do. It's hard to know if your allocation of inputs to tasks is optimal to maximize output.
Now recall <fill in>
Now recall Question No. 12 from Homework Assignment Week 6 in this course: Your firm seeks to produce a certain level of output in the most efficient way (the lowest cost). It should use its resources in which of the following ways:
:(a) use materials that generate the highest marginal product
:(b) use materials that have increasing returns to scale
:(c) use as much material as possible until there are diminishing returns
:(d) use resources such that their marginal products per unit cost are equal
That's the same problem you would face as a campaign manager for a candidate for mayor. Answer choice (a) is wrong because it doesn't factor in the cost of the materials (or inputs). Perhaps buying ads on television generates the highest marginal product (the most votes), but it may be too expensive for your campaign. Answer choice (b) is incorrect for the same reason: it ignores the cost of the materials, which is what you need to focus on. Answer choice (c) also overlooks cost.
The correct answer choice is (d): use the various inputs such that their marginal products per unit cost are equal (and maximized). If one input has a lower marginal product per cost, then that the money or labor should be shifted to a more productive input. The optimal level is when all inputs are producing, ''per cost'', at same optimal level of output.
==Example 2: Homeschool Dinner Event==
==Example 2: Homeschool Dinner Event==