Title

(4) Optimal Variable Input Use Model

Topic Category

Production

Publication Date

2011

Keywords

Optimal Input Use, Marginal Revenue Product, Marginal Physical Product, Marginal Factor Cost, Marginal Input Cost, Derived Demand

Abstract

This presents the optimal variable input use model. It introduces the key concepts of Marginal Physical Product, Marginal Revenue Product, and Marginal Factor Cost. The optimal input rule is presented, and this is linked to information on production, demand for the final product, and the price in the input market.

Run Time

10:05

Primary Discipline

Microeconomics

Skills Delivered

Ability to determine the optimal amount of a variable input in the short run. Ability to identify and explain Marginal Revenue Product and Marginal Factor Cost. Ability to explain what causes the optimal amount of variable input to change. Ability to explain the interplay of the output market, input market and production function in all of the above.

Rigor Level

2000

Prerequisites

Previous Demand, Supply, & Production Videos

Share

COinS