Hayes and Wheelwright Argued That It Is Profitable for Firms

question 24

Essay

Hayes and Wheelwright argued that it is profitable for firms to operate along the diagonal of the product-process matrix.Justify the reason surrounding their argument.Can you think of situations in which firms could move away from the diagonal and yet remain profitable?

Analyze the variations in average propensity to consume (APC) and save (APS) across different income levels.

Identify conditions under which dissaving occurs.

Predict the impact of changes in disposable income on total consumption and saving.

Decode complex graphical or data-driven representations of income and consumption/saving relationships.

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Definitions:

Marginal Product

The increase in output that results from employing one more unit of a particular input, keeping all other inputs constant.

Diminishing Marginal Returns

is an economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Variable Resource

A resource whose quantity can change in the short run to increase or decrease production levels.

Fixed Resource

A resource whose quantity cannot easily be changed in the short term, such as land, buildings, or equipment.