what is an planning curve?

Planning curve or envelope curve are the two different names for long run average cost curve. The reason why LAC is regarded as planning curve is simply that it is related to long run, wherein, a firm has adequate time to plan its resources and operate in different plant sizes (machines) along with different input combinations (how many labour units should be combined with capital inputs). In this way, operating of different plant sizes with different input combinations, finally, the firm will reach a point, wherein, it has achieved the optimum utilisation of inputs. This is the point of long run equilibrium.

You can also refer to the below link to see the difference between plant curve (short run cost curve) and planning curve (long run cost curve).


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