Efficient Production: Capital-Labour Substitution and Economies of Scale
In Chapters 5 and 6 we assumed that the enterprise’s costs are the minimum achievable. But how is this to be? Chapters 7 and 8 are largely concerned with the enterprise’s problem of attaining and maintaining minimum unit costs of production: Chapter 7 explains how unit costs are affected by capital-labour substitution and by economies of scale; Chapter 8 explains how unit costs are affected by technological change and by the learning curve. Together with the preceding Chapters 5 and 6, these two chapters on cost-effective production complete the economic analysis of the price/unit cost/profits nexus which is so important to enterprises because of the relationship, explained at the beginning of this chapter, between cost-effective production and profitability.
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