Final answer:
The candle production function Q=√(W) demonstrates the Law of Diminishing Marginal Product where the output increases at a decreasing rate as more wax is used. Demand for gigantic candles could be influenced by their perception as either a luxury item or a commodity. The efficiency of candles is significantly less than modern LED lighting, potentially affecting their demand.
Step-by-step explanation:
Marvelous Illumination (MI)'s production function for candles, Q=√(W), where W stands for the amount of wax, suggests that the candle production depends on the square root of the amount of wax used. This signifies that as MI increases the amount of wax (W), the total output of candles (Q) increases, but at a decreasing rate due to the square root relationship. This represents a principle similar to the Law of Diminishing Marginal Product, which states that adding additional factors of production eventually leads to smaller increases in output. This occurs because, in the short run, some factors are fixed—such as machinery or factory size—and cannot be adjusted to match increases in other factors like raw materials.
To illustrate, if MI were to double the wax used, it would not double the production of candles; the increase in quantity of candles would be less than double. As for demand for these gigantic candles, if the market perceives these candles as luxury or unique items, the demand might be relatively inelastic, meaning that changes in the quantity produced might not greatly affect the demand. However, if the candles are seen as commodities, an increase in production might result in a decrease in perceived value and demand. Furthermore, the efficiency of candle production compared to modern lighting, such as LED bulbs, is quite low. A candle's luminous efficacy might be 0.3 lm/W, while a modern LED's is near 100 lm/W, highlighting the vast difference in lighting efficiency. As such, while candle production might be subject to diminishing returns, candles may remain sought after for their aesthetic or traditional appeal.