Inflection

economic-dictionary

Inflection, in the field of geometry, is the point from which a curve changes its direction.

That is, the inflection is the moment in which a curve or line goes from being descending to being ascending, or vice versa. This is known as the tipping point.

Also, it may be that the graph is flat and, from the inflection, begins an upward or downward movement. The reverse context can also occur, where a curve with a certain direction becomes flat. This means that the variable of the ordinate axis (y) remains in a single value.

Another way of understanding inflection is as the instant when a mathematical function represented on a graph reaches its minimum or maximum value.

Likewise, the inflection can occur from a change in the slope. That is, the line or curve becomes more or less pronounced.

Inflection and economy

To understand the importance of the concept of inflection in economics, imagine that the graph represents the trajectory of an economic variable, for example, the exchange rate.

This means that the inflection may have as its origin an economic event or a change in another variable.

For example, an announcement by the European Central Bank (ECB) could cause an inflection in the euro / dollar exchange rate.

Example of inflection in microeconomics

Let's look at another example of an inflection in economics, but this time in the microeconomic sphere. Recall marginal cost, which is the cost of producing an additional unit.

Thus, marginal cost usually starts on a downward path, by the law of diminishing returns. That is, the cost of producing an additional unit is decreasing.

However, there comes a time when that marginal cost stops falling and begins to rise. This, because a turning point has been reached in which, as the factors of production increase, the marginal variation in the quantity produced is negative. To understand it, let's imagine that we are in a kitchen and we want to increase the number of meals or dishes prepared. Thus, we hire more staff, but there will come a time when the place will be saturated and some chefs or workers will get in the way of others.

In the graph, the lowest point on the marginal cost curve would be the inflection point.

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