Reference no: EM132813078

We have reviewed the various measurements of costs. There are some important relationships between productivity measurements of total product, average product, and the marginal product. These relationships are directly impacted by how productivity determines costs.

To answer questions 1 and 2, consider the following scenario: when a business adds headcount to the production line, productivity naturally improves. This means that the output is increased for this specific worker than previous workers.

1. Explain what will happen to the margin with regards to the additional cost of the output.

2. Explain what happens with the marginal product rising.  Does the cost of producing another unit of output decline when the marginal product is falling? Is the same true when average variable is rising? What about total product rising?

3. You are given the following economic data:

• The price of pizza is $4, the quantity demanded of pizza is 60 slices, the quantity demanded of cheese bread is 100 pieces. 
• When the price of pizza is $2, the quantity demanded of pizza is 80 slices, and the quantity demanded of cheese bread is 70 pieces.

Calculate the price of elasticity of demand. Is the result elastic or inelastic? Explain.