1. Production Chapter 5.3

2. Warm-Up “Two’s company, but three’s a crowd.” What does this saying mean? How have you seen it apply to your own life?

3. Think About it… Based on Tuesday’s activity (paper airplanes), consider the following questions: 1.What strategy made your team most efficient? 2. What were some problems you faced? 3. How was productivity affected by additional workers?

4. Production The process through which a company converts productive resources (input) into goods and services (output).

5. Short Run vs. Long Run Short Run At least one resource is fixed Long Run No resources are fixed The long run and the short run do not refer to a specific period of time such as 3 months or 5 years. The difference between the short run and the long run is the flexibility decision makers have to change the quantity of resources being used.

6. Resources Fixed (remains constant) Variable (flexible) i.e. LABOR i.e. Factories, machinery, etc.

7. Product LaborTotal Product Marginal Product 00-- 144 295 3167 4226 Total Product: Total output of the firm Marginal product: Amount the total product changes with each additional unit of resource (labor)

8. Increasing Returns The greater the resources, the greater output gained for each additional resource.

9. Law of Diminishing Returns As more units labor are added to other resources, marginal product eventually declines. Marginal product declines not because the new workers are inferior, but because of the lack of available space, equipment, etc.

10. Law of Diminishing Returns LaborTotal ProductMarginal Product 00 -- 14 4 29 5 316 7 422 6 526 4 6 0 721 -5

11. Marginal Product Curve

12. Pair-Share Based on Tuesday’s activity (paper airplanes), answer the following questions: 1.What were your variable resources? Fixed resources? 2. Why would the additional number of paper airplanes created eventually start to decline? 3. What would you need in order for companies to increase productivity as they increased their size?