Experiment 1 Paper airplanes factory
Learning objectives
In this project your students will get familiar with some concepts related to chapters 2 (Technology, population and growth), and 3 (Scarcity, Work, and Choice) including:
Key concepts
- Production function
- Marginal product
- Diminishing marginal productivity
- Production inputs
- Ceteris paribus assumption
Introduction
What will happen to a firm that doubles its number of workers in comparison to a static one? The answer may be quite surprising.
The relationship between production inputs and outputs is described by the firm’s production function (Unit 2.7). According to Malthus model, increasing production inputs results in a bigger amount of product. General evidence is consistent with this. It’s key to remember that this relationship assumes everything remains unchanged except the variation in the input levels (Unit 3.1). However, theory suggests that a marginal increase of the input will provide a smaller increase in the output level; thus, increasing an input will reduce its the average product.
This experiment presents the case of a paper airplanes industry. The class will be divided into firms. Each student will be assigned a group (firm). The production inputs will be labor (number of people at the firm), capital (paper and markers) and land (space at the table). However, it’s key that only one of these factors varies across groups: labor. The other endowments must remain fixed. Theory predicts that firms with bigger amount of labor (workers) will have an inferior average product of labor.
