3.1.2016 Slides

# 3.1.2016 Slides - Resources and Output How do levels of...

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Resources and Output How do levels of output change when the ec onomy’s resources change? Rybczynski theorem : If you hold output pri ces constant as the amount of a factor of prod uction increases, then the supply of the good that uses this factor intensively increases and the supply of the other good decreases .

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Rybczynski theorem
Input Possibilities in Food Production

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The Production Possibility Frontier with Factor Substitution

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Unformatted text preview: Production Possibilities Where on the PPF does the country produce (a llowing factor substitution)? The economy produces at the point that maxim izes the value of production, V. An isovalue line is a line representing a consta nt value of production, V: V = P C Q C + P F Q F ◦ where P C and P F are the prices of cloth and food. ◦ Slope of isovalue line is – ( P C /P F ) Prices and Production...
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• Spring '16
• Economics, Production-possibility frontier, Factor Substitution

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