Changes

Let's start with the first point above.  “Short run” costs and “long run” costs are associated with the supply of a good or service.  Short-run costs include overtime labor to try to increase supply immediately.  “Variable inputs” are the focus of short-run costs: they are the inputs (such as materials or labor) that are increased in order to produce more goods or services in the short run.  Variable inputs are different from fixed inputs, which cannot be increased in the short run.  An example of a fixed input is a manufacturing facility, which cannot be built quickly.  A stadium is a fixed input in the sports world.

Let's start with the first point above.  “Short run” costs and “long run” costs are associated with the supply of a good or service.  Short-run costs include overtime labor to try to increase supply immediately.  “Variable inputs” are the focus of short-run costs: they are the inputs (such as materials or labor) that are increased in order to produce more goods or services in the short run.  Variable inputs are different from fixed inputs, which cannot be increased in the short run.  An example of a fixed input is a manufacturing facility, which cannot be built quickly.  A stadium is a fixed input in the sports world.

This leads us to the second point above.  Essential to microeconomics are the two concepts of  “marginal ____” and “average ____.”  For example, we have “marginal cost” and “average cost.”  The “marginal cost” is how much it costs to make one more widget.  The “average cost” is the overall average per-unit cost for all the widgets you make.   

This leads us to the second point above.  Essential to microeconomics are the two concepts of  “marginal ____” and “average ____.”  For example, we have “marginal cost” and “average cost.”  The “marginal cost” is how much it costs to make one more widget (a "widget" in an economics course is an imaginary good).  The “average cost” is the overall average per-unit cost for all the widgets you make.   

And now the third point above is as follows.  The “marginal product” is the increase in supply due to one more unit of input (typically labor).  If you hire one more laborer (e.g., employee or worker), how much will your output of widgets increase?  “Marginal product,” or MP, gives you that answer.  Your overall product output (Q) is the sum of all your marginal products (MP).  You could then take the average of that, defining “average product” as your total output Q divided by your total labor (L).  Expressed as an equation, this is AP = Q/L.

And now the third point above is as follows.  The “marginal product” is the increase in supply due to one more unit of input (typically labor).  If you hire one more laborer (e.g., employee or worker), how much will your output of widgets increase?  “Marginal product,” or MP, gives you that answer.  Your overall product output (Q) is the sum of all your marginal products (MP).  You could then take the average of that, defining “average product” as your total output Q divided by your total labor (L).  Expressed as an equation, this is AP = Q/L.