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ECO401 Economics Short Notes - ECO401 Short Questions Answers - ECO401 Formulas

ECO401 Economics Short Notes - ECO401 Short Questions Answers - ECO401 Formulas

What are the three basic functions of money?

ECO401 How to calculate Marginal Rate of Substitution (MRS) using indifference curves

ECO401 Total and Marginal utility curves

ECO401 : important definitions

ECO401_Formula_Lesson1-45

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Factors of production - factory building as capital goods


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Factors of production - factory building as capital goods

Factors of production

factory building as capital goods

Factory buildings as capital goods
 

Factors of production are various types of resources used in the production ofgoods and services. They are:

  • Land (natural resource) - natural resources used in the creation of products, paid in economic rent, because they are simply irreproduceable.
  • Labor - human efforts provided in the creation of products, paid in wage.
  • Capital goods - human-made goods or means of production (including machinery, building and so forth) used in the production of other goods, paid in interest.
  • entreprenuership- manage whole system.

Income from exploiting the 3 production factors comprises the national income.

Capital and labor are active factors while land is passive. One can only shift capital and labor rather than land which is given limited, to get a production-factor combination, which is further reflected in the technology a firm employs to produce products and services.

Labor operates capital to produce. The ratio of labor over capital is a major decision almost all firms must make. In the decision process, decision makers must understand that neither too much labor per unit of capital nor too much capital per unit of labor is acceptable since either way efficiency is not achieved. The 2 factors must come around someplace that both of them contribute equally to the final economic value realized.

ECO401 How to calculate Marginal Rate of Substitution (MRS) using indifference curves

How to calculate Marginal Rate of Substitution (MRS) using indifference curves



Suppose a person is willing to give up 20 units of good A (on the vertical axis) for 10 units of good B (on the horizontal axis), and his level of satisfaction is unchanged, the marginal rate of substitution is:
0.5.
2.
5.
10.

MRS = 20/10= 2
 

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