Learning Curve:

The term learning curve refers to a graphical representation of the changing rate of
learning (in the average person) for a given activity or tool. In other words, A learning
curve is a concept used to measure how quickly a skill can be mastered. Usually
shown as a simple graph, a learning curve often depicts the combination of the time it
takes to learn a new idea or skill set, combined with the rate at which mastery is
achieved. Learning curves are often used to measure an individual’s progress
against an average. Typically, the increase in retention of information is sharpest
after the initial attempts, and then gradually evens out, meaning that less and less
new information is retained after each repetition. 1

However, from the perspective of Economics, the learning curve shows the decline in
the average input cost of production with rising cumulative total outputsof the firm
over time.For example, it might take 1000 hours for an aircraft manufacturer to
assemble the 100th aircraft , but only 700 hours to assemble the 200th aircraft
because as managers and workers gain production experience they usually become
efficient, especially when the production process is relatively new. Contrast this with
economies of scale ,which refers to declining long-run average cost as the firm’s
output per time period increases.

1
http://en.wikipedia.org/wiki/Learning_curve
 Learning Curve

The left panel shows that as the cumulative output of the firm doubles from 10 to 20
units over time, the average cost declines from $10 to $7(the movement from point H
to point T on the Learning curve). The right panel shows that LAC declines from $20
to $15 as output increases from 4 to 6 units per time period (the movement from
point D to point F along the LAC curve) due to increasing returns to scale. But LAC
falls from $20 to $ 12.5 to produce4 units of output per time period as the firms learns
from larger cumulative total outputs. (the downward shift of the LAC curve from point
D to point D*). 2

2
Salvatore, Dominick; ”Microeconimics: Theory and Applications”(2003), 4th Edt, New York: Oxford
University Press