Learning Curve: An Important Modern Concept in Economics
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The learning curve is an important modern concept according to which cumulative experience in the production of a product over time increases efficiency in ... YourArticleLibrary Home StaticMainMenuHome ShareYourFiles Disclaimer PrivacyPolicy ContactUs ProhibitedContent ProhibitedContent ImageGuidelines PlagiarismPrevention ContentFiltrations TermsofService AccountDisabled ReturntoContent Articlesharedby: ADVERTISEMENTS: Thelearningcurveisanimportantmodernconceptaccordingtowhichcumulativeexperienceintheproductionofaproductovertimeincreasesefficiencyintheuseofinputssuchaslabourandrawmaterialsandtherebylowerscostperunitofoutput.K.J.Arrow,oneofthepioneersinputtingforwardthisconceptcallsit“Learningbydoing”. AccordingtoArrow,asafirmoritsmanagerproducessuccessivelotsofoutputovervariousperiodsoftime,itlearnstoproducemorewithagivenquantityofresourcesoritiscapableofproducingagivenoutputbyusinglesserquantitiesofinputsorresourcesthanbefore. Thus,eitherwiththeincreaseinefficiencyofresourcesorwithsavinginresourcessuchaslabourandrawmaterials,costperunitofoutputdeclines.Thislearningcurveeffectmostlyoccursinthereductionoflabourrequirementsperunitofoutput. ADVERTISEMENTS: Anumberoffactorsbringthislearningcurveeffect.Ascumulativevolumeofoutputoversuccessiveperiodsoftimeincreases,labourandsupervisorsbecomemorefamiliarwiththeworkmethodsortheproductionprocess,whichleadstothereductionintheamountofscrapandothertypesofwastes. Besides,rawmaterialscostperunitofoutputmayalsodeclineascumulativevolumeofoutputinsuccessiveperiodsovertimeincreasesandasaresultafirmgainsmoreexperienceindoingaproductionprocessrepeatedlyoversuccessivetimeperiods. ThelearningcurveisgraphicallyshowninFig.19.16whereontheX-axiscumulativetotaloutputoversuccessiveperiodsoftimeandontheF-axiscostperunitofoutputaremeasured.ItwillbeseenfromFig.19.16thatthelearningcurveshowsdownwardwhichshowsdecliningcostperunitofoutputascumulativeoutputincreasesovertimeandthefirmlearnsfromitsworkexperience. Thelearningcurveeffectisusuallyexpressedasaconstantpercentage.Thispercentagerepresentstheproportionbywhichcostperunitofoutputdeclineswiththeincreaseincumulativeoutputineachsuccessivetimeperiod. ADVERTISEMENTS: Forexample,ifinaproductionprocesslabour-inputcostexperiences80percentlearningcurveeffect,thismeansthatifinthefirstperiodproductionofaunitofoutputrequireslabourcostofRs.1000,inthenextperiodlabourcostperunitwilldeclinetoRs.800andsoforth. Thislearning-curverelationshipbetweencostoutputsisexpressedalgebraicallyasfollows: C=aAb ADVERTISEMENTS: WhereCistheinputcostofQthunitofoutput,Qissuccessiveunitofoutputproduced,aistheinputcostperunitofoutputinthefirstperiodandbistherateofdeclineincostperunitofoutputinthesuccessiveperiod.Sincethelearningcurveisdownwardsloping,thevalueofbisnegative. Itisimportanttonotethatreductionincostperunitduetothelearningcurveeffectisdifferentfromeconomiesofscale.Whereaseconomiesofscalerefertothedeclineincostperunitofoutputasafirm’soutputpertimeperiodincreases,thelearningcurvedescribesthereductionincostperunitofoutputasafirm’scumulativeoutputoversuccessivetimeperiodsincreases,whileoutputperperiodmayremainthesame. RelatedArticles: MarginalCost L-ShapedLongRunAverageCostCurve:ModernCostTheory Cur L-ShapedLongRunAverageCostCurve:ModernCostTheory TypesofExternalEconomiesandCostCurveinEconomics Nocommentsyet. LeaveaReplyClickheretocancelreply.Youmustbeloggedintopostacomment. Beforepublishingyourarticlesonthissite,pleasereadthefollowingpages:1.ContentGuidelines2.ProhibitedContent3.PlagiarismPrevention4.ImageGuidelines5.ContentFiltrations6.TOS7.PrivacyPolicy8.Disclaimer9.Copyright10.ReportaViolationAdvertisements Latest WorkingCapitalManagement April27,2022 WhatisFinance? April25,2022 WhatisInventoryManagement? January20,2022 ConsumerDecisionMaking January6,2021 DiffusionofInnovation November9,2020
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