This article discusses about the equimarginal principle in economics, its formula and assumptions. It is applicable when limited resources are to be allocated. The Equimarginal Principle. At this point, you may think we have exhausted all the insights we can get from the hamburger-shirt problem. We have not. The table . Equimarginal principle: economics: Theory of allocation: particular examples of the “equimarginal principle,” a tool that can be applied to any decision that.
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This principle is also known the principle of maximum satisfaction. According to this principle, an input should be allocated in such a maimer that the value added by the last unit of input is same in all uses.
Equimarginal principle | economics |
The equi-marginal principle can be applied in different areas of management. It is used in budgeting. The objective is to allocate resources where hey are most productive. It can be used for eliminating waste in useless activities. It can be applied in any discussion of budgeting.
The management can accept investments with high rates of return so as to ensure optimum allocation of capital resources. The equi-marginal principle can also be applied in multiple product primciple.
A multi product firm will reach equilibrium when the marginal revenue obtained from a product is equal to that of another product or products. The equi-marginal principle may also be applied in allocating research expenditures. This principle suggests that available resources inputs should be so allocated between the alternative options that the marginal productivity gains MP from the various activities are qualized.
Equi-marginal principle is applied in the allocation of the resource in the way of production. Example a farmer is having different four agricultural farms like. The above four agricultural farms are in the total 80 acres, each farm in the 20 acres, all together 80 acres. The farmer equimxrginal having limited 80 employees with him for employing in the four farms for production. In general, 80 employees are divided and employed for four farms evenly as each farm will be allotted with 20 employees.
However, in reality there is no need to allot 20 employees for each farm, because mango farm need less number of employees, whereas paddy farm needs more number of employees. Sugarcane and corn farms require average number of employees. The above table reveals the allocation of the resources labour available with a farmer according wquimarginal the production nature and requirement.
Baumol’s Theory of Sales Revenue Maximisation. Marris Growth Maximization Model: Principle of time perspective. The Model of Supply and Demand equilibrium.
Constant Returns to Scale. Increasing Returns to Scale. Decreasing Returns to Scale.
Average total cost ATC. Definitions In the words of Ferguson, “Law of equi-marginal utility states that to maximise utility, consumers way allocate their limited incomes among goods and services in such a way that the marginal utilities per dollar rupee of expenditure on the last unit of each good purchased will be equal” According to Marshall, “if a person has a thing which he can put to several uses, he will distribute it among these uses in such a way that it has the same marginal utility in all” Lipsey is of the view that, “The consumer maximising his utility wilt so allocate expenditure between commodities that the utility derived from the last unit of money spent on each is equal” Example: Students may not always allot 2 days for each subject, they may allot more days for hard subject and less days for easy subject to maintain good percentage Example: Example a farmer is having different four agricultural farms like 1.
Like shown below Farms.