Question

What is a "learning curve?" What is an "experience curve?" How do they differ? What are the basic assumptions upon which the learning curve is based?

Answer 1

A learning curve is a graphical representation of how an increase in learning comes from greater experience (the horizontal axis); or how the more someone performs a task, the better they get at it. A learning curve is a process where people develop a skill by learning from their mistakes. A steep learning curve involves learning very quickly.

Experience curve refers to a diagrammatic representation of the inverse relationship between the total value-added costs of a product and the company experience in manufacturing and marketing it. it is a Graph that depicts the 'experience effect' as reflected in reduced average and marginal costs.

1. The key difference between learning curve and experience curve is that learning curve is a graphical representation that shows the decrease in average labor cost in repetitive operations as the employees obtain more learning whereas experience curve depicts the overall cost saving as the production grows in volume.

2. Learning curve was developed in 1885 by psychologist Hermann Ebbinghaus. Experience curve is developed by Bruce D. Henderson and the Boston Consulting Group in the 1960s.

3. Savings from learning curve effect is primarily used for forecasting labor costs. Savings from experience curve effect is broader and have a strategic value.

Learning curve theory is based on three assumptions:----------

1. The amount of time required to complete a given task or unit of a product will be less each time the task is undertaken.

2. The unit time will decrease at a decreasing rate

3. The reduction in time will follow a predictable pattern.