DIS 8 Handout - Aniko Oery University of California,...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Aniko Oery University of California, Berkeley Section 8: The production function, MRTS and the elasticity of substitution Econ 100A, MICRO-ECONOMIC ANALYSIS, Spring 2010 So far, we have analyzed the demand side of the market and we could finally derive the market demand function. Now, we will try to understand better the supply side of the market. We will use similar tools as for the analysis of consumer choice, but there are major differences in the way we will model the decision making of firms. First, we need to understand how the firm can find the optimal input mix that minimizes its costs given a certain quantity of output that it wants to produce. This is basically what we will do before the first midterm. Today, we introduce the production function, the marginal rate of technical substitution and the elasticity of substitution. 1 The production function The production function is a function that discribes how much output can be produced at most given a certain input mix. If there is only one input, then it is a univariate function
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

DIS 8 Handout - Aniko Oery University of California,...

This preview shows document pages 1 - 2. Sign up to view the full document.

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