Econ100A.Sep25 - Production Theory Econ 100A Economic...

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Production Theory Econ 100A - Economic Analysis - Microeconomics Raphaël Giraud 1 University of Franche-Comté (France) 2 Visiting Assistant Professor at Berkeley University 3 [email protected] Raphaël Giraud Intermediate Microeconomics
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Production Theory Menu du jour September 25: Production Theory: Describing the technological constraints. Readings: PR3 2,3,4,5 Raphaël Giraud Intermediate Microeconomics
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Production Theory Introduction The Technological Constraint Différentes notions d’efficacité productive Production Theory Introduction The main objective of this chapter is to study two related aspects of producer behavior: Demand for Inputs (that includes labor demand and capital demand) The output supply. However the focus will be here more on input demand, as the output supply question will be dealt with when we speak of competition. Raphaël Giraud Intermediate Microeconomics
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Production Theory Introduction The Technological Constraint Différentes notions d’efficacité productive Production Theory Introduction From a mathematical point of view, the theory of production is very similar to the theory of consumer that we just discussed This might be a strength as it shows that there is some unity in the microeconomic point of view on things, But it may also be a weakness if it leads to ignore some specificities of a firm as a group of individuals, with conflicting interests, rather than as a single agent. This has led to harsh criticisms regarding the empirical relevance of this theory in the 1960s, that gave birth to striving branches of economics: Industrial Organization, Contract Economics, etc. However most of its concepts are still powerful analytical tools, e.g. for the macroeconomic analysis of growth (cf.PR Ex. 6.2). Raphaël Giraud Intermediate Microeconomics
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Production Theory Introduction The Technological Constraint Différentes notions d’efficacité productive Production Theory Introduction What is the economic definition of a firm? A real-life firm has many functions: It produces the goods consumed in the economy; It provides jobs to its employees, thereby giving them the means to survive; It is a place for social intercourse, where people spend most of their lives; It can provide people a way of making the most of themselves, a goal in life, or, on a contrary be a place of alienation, where peoples personalities are negated; It is a part of society, through the brands and myth it generates, the events and institutions it sponsors, . . . . Raphaël Giraud Intermediate Microeconomics
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Production Theory Introduction The Technological Constraint Différentes notions d’efficacité productive Production Theory Introduction All in all, a firm is a very complex social object. It is very difficult to deal with all its aspects at the same time.
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