ECO402 Microeconomics GDB Fall 2020 Solution / Discussion
GDB Topic: Majid Clothing Limited is a garment factory. It produces leather jackets in winter and cotton t-shirts in summer. Hence it operates around the whole year, without any specific production gaps. It’s pertinent to mention that like many other large garment units, the Majid Clothing Limited has also taken loan from the bank to run its business smoothly per the loan agreement, Majid Clothing Limited has a lease on its building and equipment. There are certain fixed and variable factors of production, which have been used by the Majid Clothing Limited for the process of production. During the period of the lease, Majid Clothing Limited’s capital is its fixed factor of production. Majid Clothing Limited’s variable factors of production include things such as labor, raw cloths, and electricity. As per the book, keeping in view the microeconomic analysis, we shall simplify the scenario by assuming that labor is only variable factor of production of this factory. It can be concluded that Majid Clothing Limited can obtain different levels of output (total product of the firm) with varying amounts of labor, keeping a given level of capital.
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