Why MC is reciprocal of MP?explain by giving example of real life?plz dont do practically as given in test(q11)?
Shivang,
As we know, as per law of variable proportion, if we combine variable factor with the fixed factor in the short period, output will increase. During the initial phase, when we combine fixed factor with the variable factor, then it results in fall in costs because the factors are utilised more efficiently. So, the law of increasing returns or diminishing cost is being followed by output. (MP rises and MC falls). The next stage is constant returns where AC is minimum and output is maximum. After this, if we increase the amount of variable factors knowing that fixed factors have already been used upto their maximum limit, then stage of diminishing returns or increasing cost arises (MP falls and MC starts rising). This is the reason, that MC is reciprocal of MP.
As we know, as per law of variable proportion, if we combine variable factor with the fixed factor in the short period, output will increase. During the initial phase, when we combine fixed factor with the variable factor, then it results in fall in costs because the factors are utilised more efficiently. So, the law of increasing returns or diminishing cost is being followed by output. (MP rises and MC falls). The next stage is constant returns where AC is minimum and output is maximum. After this, if we increase the amount of variable factors knowing that fixed factors have already been used upto their maximum limit, then stage of diminishing returns or increasing cost arises (MP falls and MC starts rising). This is the reason, that MC is reciprocal of MP.