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LERNER INDEX: The difference between price (p) and marginal cost (mc) as a fraction of price, that is [p-mc]/p. The Lerner index is usually taken as an indicator of market power because the larger the index, the larger the difference between price and marginal cost, that is, the larger the distance between the price and the competitive price. The Lerner index depends on the elasticity of demand. The Lerner index is also called the price-cost margin.

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INVESTMENT EXPENDITURES: Expenditures by the business sector on final goods and services, in particular, capital goods like factories and equipment, undertaken in a given time period.

     See also | Keynesian economics | investment line | national income | marginal propensity to invest | aggregate expenditures | aggregate expenditures line | Keynesian cross | saving-investment model | induced investment | autonomous investment |


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INVESTMENT EXPENDITURES, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: March 19, 2024].


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MARGINAL COST AND LAW OF DIMINISHING MARGINAL RETURNS

Decreasing then increasing marginal cost, reflected by a U-shaped marginal cost curve, is the result of increasing then decreasing marginal returns. In particular the decreasing marginal returns is caused by the law of diminishing marginal returns. As such, the law of diminishing marginal returns affects not only the short-run production of a firm but also the cost of short-run production. This translates into a positively-sloped supply curve for profit-maximizing competitive firms.

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