1
TECHNOLOGY
q
L
M. Muniagurria
Econ 464
Microeconomics Handout (Part 1)
I.
: Production Function, Marginal Productivity of Inputs, Isoquants
(1)
Case of One Input
: L (Labor):
q = f (L)
•
Let q equal output so the production function relates L to q.
(How much
output can be produced with a given amount of labor?)
•
Marginal productivity of labor = MPL is defined as
= Slope of prod. Function
Small changes
i.e. The change in output if we change the amount of labor used by a
very small amount.
•
How to find total output (q) if we only have information about the MPL:
“In general” q is equal to the area under the MPL curve when there is
only one input.
Examples
:
(a)
Linear production functions.
Possible forms:
q = 10 L

MPL = 10
q = ½ L

MPL = ½
q = 4 L

MPL = 4
The production function q = 4L is graphed below.
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2
q
8
Notice that if we only have diagram 2, we can calculate output for different amounts of
labor as the area under MPL:
If L = 2

= Area below MPL
for L Less or
equal to 2
=
=
in Diagram 2
Remark
: In all the examples in (a) MPL is constant
.
(b) Production Functions With Decreasing MPL.
Remark: Often this is thought as the case of one variable input (Labor = L) and a fixed
factor (land or entrepreneurial ability)
(2) Case of Two Variable Inputs
:
q = f (L, K)
L (Labor), K (Capital)
• Production function relates L & K to q (total output)
• Isoquant: Combinations of L & K that can achieve the same q
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 Spring '08
 Maria
 Economics, Microeconomics, fixed factor, MPl

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