F105 Economics Optimum site intensity

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Optimum Site intensity

Marginal Principle applied in F101ECO

MARGINAL ADVANTAGE= EXTRA REVENUE GENERATED (MRP)

MARGINAL DISADVANTAGE= EXTRA CAPITAL COSTS (MCK)

the marginal product is the extra product generated by apply one extra unit of variable input employed. and was related to output decisions in perfect competition, imperfect competition and monopoly.

here it is applied to input decisions of land, labour or capital.

a developer is essentially an entrepreneur accepting the risk of producing for uncertain demand. There is risk on both demand and supply side and he also occurs costs ripening (whilst acheiving best and highest use) and waiting costs

Revenues are determined site use and capital outlay therefore capital spending questions are raised

  • refinements required (install if enhanced NPV exceeds cost of installation)
  • increased capital costs v. future maintenance costs (maybe imaterial if availability of capital imposes a budget restraint.

depends on MR=MC and addition to…

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