Page 205 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes productivity can be improved as long as each additional unit of labour to produce MP as the positive.
L
Placing additional labour costs or expenses are removed by generating an output that is mainly that by
producing more spending is completed.
In the long run, all the means of production are variable, so firm the means to take all of them and
can use different combinations. This combination is called a minimum cost. It is therefore made for all
modes of production cost per unit is equal to marginal product, that is:
MP L = MP K
____
_____

P
P
L
K
Over the long term, changes in self-production function, i.e, production technology can be used to
change the way and therefore cost more to produce the same amount of output curve changes and
slides downward. In other words, technological change is a change or newly created, with the cost of a
given product, the available means of production can be reduced by using more efficiently.
The cost of production can be reduced by using the new scientific and modern innovation. Schumpeter,
is an exponent of a monopolistic competition, because it inspires firms for innovations. Therefore, in
long-term because of economic signals, great technological changes occur.
Technical innovation is the result of ever changing economic signals; a given change in market conditions
as a result of these firms is to describe the dynamic response. Resources as a result of changes in the cost
of replacement tools encourage firms to innovate.
For example, increasing costs of labour in the production of capital intensive firms / methods have
begun to explore techniques (Increase in the value of labour, trade union and the government’s wage
policy due to legal requirements). Transport, communications, manufacturing and labour in the global
nature of the place had become committed capital loss.
Over the long-term, technological innovation are not limited to a single country, but usually spread to
all parts of the world. Suppose country ‘A’ using labour and capital has been able to produce cloth. In
the short term there is an increase in the price of labour, because it cannot do Substitution of capital for
labour in return. But the increasing cost of labour will not be in the interest of the country, it would lose
its competitiveness in the world market. Such a loss inspires innovation, in order to gain market share.
Over the long-term to reduce production costs, firms may engage in research and development. If they
will be successful in developing such processes by which, as compared to other countries, they will
bring their production costs down. The motivation is purely to change endogenous and these are not
available on competitive countries, which is not affected by the increase in labour costs.
Therefore, changes in the price of any change in the production of economic signals and firm response
of firms, depending on the time period, which can be analyzed in three stages.

— Coordination as short response variable means
— Coordination as the means of production in response long run
— As innovation, research and development of long-term response, i.e, response.

9.19 Summary

• In short-term the demand and price of commodity decreases. The firm has to take the decision to
continue production or stop it during the recession. In the short-term after stopping production, the
firm still has to pay fixed costs such as building rent, interest, etc. Therefore, at the time of recession,
the decline in commodity prices - is the same as the cost increases. The firm will opt only for continuing
production. It will bear loss of fixed costs. Firm will continue production till the time it doesn't get
variable costs. But if the firm will not receive variable costs then it will stop the production.

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