Jeffrey Jabson

Economics

A.) Law of diminishing returns:

As more of the same input is employed in the production of a particular good, the corresponding increase in the total output tends to become smaller and smaller if the amount of the other inputs required in the production process are kept constant.

B.) Law of increasing cost:

As more of a given good is produced the total cost of production increases at an increasing rate. The total cost curved tends to become more and more vertical.

• Law of diminishing returns requires or have several factors in which to consider, namely; workplace, capital, equipment, skill ( e.g. of worker ). But if the amount of the other inputs required in the production process are kept constant, the increase in the total output tends to become smaller because there will be wasted goods if the increase in total output becomes larger or is at a constant.

• Law of increasing cost in a way, is like the reverse of diminishing returns. This is true because when more of a good is produced, more resources are required in order to do such, and production cost increases always as more and more of a given good is produced.

Factors that influence supply:

Prices of the factors of production ( workplace, capital, equipment, skill [ex. of baker]):

These factors can or may influence supply explained in the ff:

• Workplace: if the place of work is expensive, like say, rent on a mall as compared in a sidewalk, when in a mall and the rent is high, it can influence your supply by cutting it because your on a tight budget, or increasing it if you want to earn more, provided that you will not have excess supply or is not wasted. While if the workplace is cheap, like in a sidewalk, you have flexibility in your supply because you need not worry about your rent expenses.

• Capital: same as the above, when your capital is small, you therefore have limited resources and may opt to have a lesser supply, but if you have a big capital, there is that room for risk or gamble, and you may choose to have more supply.

• Equipment: your machinery may affect supply like when you have state-of-the-art machinery, you can easily produce more, with lesser cost and effort. But when you have equipment that is like an old man that at times it stops and goes and at worst, breaks down once in a while, your production is limited and even adds to your other worries and expenses.

• Skill: skilled workers are always preferred than lazy, useless ones.

Productivity of the inputs:

Productivity of the input affects or influence supply in a sense that, when the inputs are productive, there is more production or supply, and when the inputs are not productive, there is less production or supply.

Factors that can shift the supply curve:

Change in the number of producers:

When producers are less in number, it is more likely that there is less competition and the price will be shifted to an expensive one, but if there are many producers, there will be choices and it is likely that they will be obliged or be forced to compete and therefore the supply curve will be shifted.

Change in the productivity of the inputs of production:

This can shift the supply curve like when the inputs of production is productive, this can shift the supply curve to become expensive and more production because of the consumers’ increased need. But if otherwise, the demand curve will go down because of lesser consumer preference.

Change in the cost of inputs:

This affects the supply curve in a sense that when cost of inputs are expensive, it may make the supply less because of lack of resources or worse, may continue to have the same amount of supply, but the price will rise significantly. Or when cost of inputs are cheap, supply may increase because consumers may buy more because it is cheap.

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