A2 M3 Lesson 2 Introduction to Costs

1. Go through answers from hwk (1-input/output/magic box ; 2 - production role of entrepreneur)
2. Use answers from 3 to go into short run v long run
• explain concept - alternative way of viewing time / helps to compare seemingly very different production processes
• example - window cleaner / air plane maker - elicit examples of f of p
• rank f of p according to ease of adding more
• line on WB - distinction short/long run, the tipping point. Add f of ps from example businesses
• Therefore, can see similarities btw any production process FOR ANY BUSINESS SHORT AND LONG RUN CONDITIONS ARE DIFFFERENT ESP COSTS
• Powell diagram p.13 - emphasises returns to scale = economies of scale
3. Fixed costs
• Give defs of fixed/variable costs and elicit examples
• Student sketch TFC curve
• PPP gym example to demonstrate AFC https://mail.google.com/mail/?shva=1#inbox/126d0d2ce574262a