lecture_5 - Technology A technology is a process by which...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
ECOS2001 Lecture 5 1 Technology A technology is a process by which inputs are converted to an output. Usually several technologies will produce the same product Which technology is “best”? How do we compare technologies?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECOS2001 Lecture 5 2 Input Bundles xi denotes the amount used of input i; i.e. the level of input i. An input bundle is a vector of the input levels; (x1, x2, … , xn). y denotes the output level. The technology’s production function states the maximum amount of output possible from an input bundle. 1 (, , ) n yf xx = "
Background image of page 2
ECOS2001 Lecture 5 3 Production Functions y = f(x) is the production function. x’ x Input Level Output Level y’ y’ = f(x’) is the maximal output level obtainable from x’ input units. One input, one output
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECOS2001 Lecture 5 4 Technology Sets A production plan is an input bundle and an output level; (x1, … , xn, y). A production plan is feasible if The collection of all feasible production plans is the technology set 1 (, , ) n yf x x "
Background image of page 4
ECOS2001 Lecture 5 5 Technologies with Multiple Inputs What does a technology look like when there is more than one input? The two input case: Input levels are x1 and x2. Output level is y. The y output unit isoquant is the set of all input bundles that yield at most the same output level y
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECOS2001 Lecture 5 6 Fixed proportions
Background image of page 6
ECOS2001 Lecture 5 7 Perfect substitutes
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECOS2001 Lecture 5 8 Cobb-Douglas production function
Background image of page 8
ECOS2001 Lecture 5 9 Properties of technology Monotonic – increase at least one input, should produce at least as much output as originally (free disposal) Convex – If the input bundles x’ and x” both provide y units of output then the mixture tx’ + (1-t)x” provides at least y units of output, for any 0 < t < 1.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECOS2001 Lecture 5 10 Well-Behaved Technologies - Convexity x 2 x 1 x 2 ' x 1 ' x 2 " x 1 " y ≡100
Background image of page 10
ECOS2001 Lecture 5 11 Well-Behaved Technologies - Convexity x 2 x 1 x 2 ' x 1 ' x 2 " x 1 " y ≡100 y ≡120 ( ) '" ' " 11 2 2 (1 ) , ) tx t x tx t x +−
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECOS2001 Lecture 5 12 Marginal (Physical) Products The marginal product of input i is the rate-of-change of the output level as the level of input i changes, holding all other input levels fixed.
Background image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 41

lecture_5 - Technology A technology is a process by which...

This preview shows document pages 1 - 13. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online