Thank you fellow teacher! Sometimes the videos come out on-point (not always but I try 😅) and I was happy with this one. Good luck to your class, the students sound like they’re in good hands 😎🙏👍

Thanks! I really like doing the videos and the comments help me, thanks so much!

Glad it was helpful! Thanks so much for your comment, you are too kind 🙏😊 indeed economics can look scary, but mostly it’s all bark no bite if you get my drift…

That's so nice thanks! Good luck with your study!

It's so special to hear a compliment from professional teachers, thanks so much!

Thank-you! That's really nice, hope you have a great day! :)

@@econhelp_official thanks for your kindness I Hope you have awesome day

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Wow that's so cool! You're so lovely, thanks so much xxxoooo

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You're welcome! Good to know my video is relevant for the A-levels! Thanks for the comment :)

Aw nice! Hope your assignment went well!

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​@econhelp44 Does every SRAC touch LRAC at its minimum point?

@@user-ht8pm8fp3j good question and nope, absolutely not. Min sr atc does not need to be on lrac and lrac does not consist of only min srac. Actually it’s only at the minimum of lrac that they will definitely be tangent. I should make a video on this point. I will put this on my list of videos to do, but feel free to email me on econmathhelp@gmail.com if you want more discussion/help or you can answer here too 😀

@econhelp44 I am eager for the video on this topic! I'll try to sort it out myself and then might write to you to verify guesses. Thanks!

@@user-ht8pm8fp3j So one interesting story about this topic is here conversableeconomist.blogspot.com/2019/12/the-story-of-viners-draftsman.html#:~:text=Viner's%20draftsman%20was%20a%20mathematician,in%20the%20figure%2C%20AC). There are really two points, the first is why SRAC is (typically) not at a minimum when it hits LRAC, and an easy response is because there is no conceptual requirement for that to be the case (there is a more thorough response which involves a discussion about minimisation and tangency, that's a longer topic, but just noting that there is no conceptual requirement for that to be the case might help). Except at the minimum of the LRAC, and to say this another way, where the LRAC is perfectly horizontal. At this point it is conceptually impossible for the SRAC curve to be at any other point other than its minimum. This is a conceptual necessity; since the minimum of the LRAC is the lowest possible ATC when all factors are variable. If SRAC was anywhere else than it's minimum at this point that would be a direct contradiction. Does that help at all?

Really good question, I find this stuff really difficult. Some texts identify productive efficiency with technical efficiency, some use a broader definition (I think… it’s so confusing), so even on definitions alone I find this area problematic. Best to ask your teacher/ check textbook. In my experience more advanced texts take LR equilibrium to be at min LRAC, and this is what it is to be productively efficient. More beginner texts don’t seem to differentiate between LRAC and SRAC, they just say P= min AC in the LR, and they sometimes say this is productive efficiency… hope this helps, sorry I don’t know the proper answer!

Really good question. The short answer is that it doesn't have to, but we usually show it this way because it gives the LRAC curve a 'u' shape that has some properties that some economists find attractive. The downward sloping section (economies of scale) is often explained as follows: as firm output increases inputs to production are able to specialise (become more efficient). Alternatively, at larger scales the firm can often get discounts on our inputs to production (bulk discounts). Both effects will reduce average total costs. In some texts the downward sloping section is linked to the firm exhibiting increasing returns to scale. This would be true if the technology used to make the good was such that for any proportionate increase in the inputs, output increases more than that proportion. For instance if we double all of the inputs then we would get than double the output back. The upward sloping part (diseconomies of scale) is harder to rationalise and in different text books you see different sorts of explanations. Some texts relate the upward sloping portion of the LRAC (diseconomies of scale) to decreasing returns to scale (RTS). I find this less convincing since it would mean that the firm’s technology has changed in such a way that the production function now exhibits decreasing returns to scale (imho... why would the technology change to make things more expensive on average if we increase all inputs by some proportion??). The only thing I can think of is that perhaps it is hard to organise large scale firms, which means that the firm becomes inefficient and each marginal unit becomes more expensive. Other authors give different accounts. Varian - probably one of the more common intermediate text books attributes the u shape of LRAC to the presence of 'quasi-fixed' factors. From what I can tell, what Varian means here is that these inputs to production are 'fixed' in the sense that the firm only has a fixed amount of them (they don't vary with Q). In this sense, eventually these quasi fixed factors will lead to rising average costs as they are constrained in the same way fixed factors of production in the short run leads to rising (SR)MC and rising (SR)ATC -I'm guessing from what I gauge the text, Varian is not super clear here (I have a video on firm SR costs that explains this if you are confused). But, these quasi fixed factors are not sunk - so the firm only has to pay them if they produce some positive amount so it's not like a constraint in the short run where the firm has no choice but to have them in the particular level that has already been paid for. It's just that we need (have) them in a fixed amount. It's worth noting that the cost associated with them will be a fixed amount, and this will give us the downward sloping section as well of LRAC as well. I find Varian a bit hard to interpret here, but reading between the lines maybe this is what he might mean - as the firm expands they are going to hit some sort of constraint on their expansion (eventually). There is only so much land available, or water, or labour: nothing is infinite, and so once one of these is exhausted, it becomes 'fixed' in a sense (we call this 'quasi-fixed'). Our other factors of production then have to work around this constraint and LRMC and therefore LRAC increases. This interpretation is intuitive to me, but I think i've probably even read too much into Varian here. This argument is under section 22.5 Long-Run Costs 9th edition of Varian if you want to ever have a look. I think most texts don't offer this kind of explanation because we're in the long run and any sort of mention of constraint will just confuse students (since the defining difference between SR and LR is that all inputs are variable so there are no constraints... ). So that's a lot, but those are my thoughts, explanations do differ across different texts... Very sorry I can't offer a more simple response, hope it helped. Edit: Sorry about the edit, it’s a topic I’ve thought about before so I have lots of thoughts, my first version was jumbled.

Related to your first argument with the upward sloping part, Becker says in his book that there is one factor that is finite, the owner of the firm. Contracted managers are involved in principal agent issues, so the productivity of the owner it's not replicable. You can sell part of your company but small shareholders have less incentives than one single owner to control and work in the company. PD: you are the best explaining microeconomics and your videos are so useful and clears.

@@sannti741 I didn't know that! If you have time, which book was it? Creating the videos on this stuff is actually really interesting, because if you look at different texts often they differ (ever so slightly sometimes!) in their treatments and explanations. Sometimes we treat our models in economics as if there is only one true correct account, but actually you can get (slightly) different variations and different authors stress different things. I don't take this as problematic, just as interesting, but I do feel like if we don't acknowledge it, we miss out on acknowledging that working with models can be hard, it can be interpretative, and should be done with care. It's not just maths. Thanks for the nice comment by the way! Made my day :)

@@econhelp_official it is "Economic Theory" by Gary Becker. This book has a lot of useful interpretations slightly differents. He start the book showing that is possible to get the same conclusion of the traditional consumtion problem but just with the budget constraint, the preferences are not necessary (adding some additional assumptions). Continue making videos, you are the best :)

It’s 7, the labelling is just poor, I did the best I could sorry. To see it clearer count from the right hand side back. The furthest is 8, second furthest is 7, that’s the lowest srac associated with q**.