# Learning Curve: Theory Meaning Formula

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We have detail information of Learning Curve: Theory, Meaning, Formula graphs.

## Learning Curve: Theory, Meaning, Formula

Following is the detail information

Meaning

Learning curve is defined as the curve that shows the decline in average cost of production with rise in cumulative total output overtime. In other words, A learning curve refers to the graphical representation or mathematical concept that depicts the rate at which learning or skill acquisition occurs over time. As firms gain experience in the production of a commodity or service, their average cost of production declines.

The learning curve can be expressed algebraically as follows:

C = a Qb … (i)

Taking log on both sides of the equation (i), we get

Log C = Log (a. Qb)

or, Log C = Log a + Log Qb

∴ Log C = Log a + b LogQ … (ii)

#### Graphs of Learning Curve

Significance or importance of Learning Curve in Business Decision Making

The significance or importance or uses of learning curve are as follows:

• It helps to make pricing decisions and production strategies.
• It helps managers to improve their ability in forecasting production cost based on
projected cumulative output.
• Learning Curve helps to determine long-run competitive strategy.
• It helps to choose production techniques.

Example of Learning Curve

Assume that the first unit labour cost of Rs. 1000 to produce. So, the second unit will cost Rs. 1000 *0.80 = Rs. 800, the fourth unit Rs. 640 ( 800* 0.80), the eight unit Rs. 512 ( Rs. 640*0.80), the sixteenth unit Rs. 409.60 ( Rs. 512*0.80) and so on.