Imagine company XYZ manufacturers some electronics parts for Tesla. The sales have been increasing in the last 3 months, but Tesla is asking to cut its sales price to Tesla. The company XYZ has seen a decline in its overall costs and only want to reduce the sales price to Tesla equal to its savings in costs to protect its profit margins.

 

Month      Cost per unit   Monthly Production Quantity

1               $82              131,500

2               $66                 149,900

3               $58                 160,400

Calculate the rate of learning at the end of period 3. What can we expect to happen to the cost per unit every time cumulative production doubles?