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Slide_06 - ECO1011B Basic Micro th set of slides 6 Travis...

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ECO1011B Basic Micro 6 th set of slides Travis Ng 2008 Fall
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From consumption to production Consumer’s preference Budget & other constraints Consumption choices Firm’s production technology Cost constraints Input and output choices + + ↓↓
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From consumption to production Consumer’s preference Budget & other constraints Consumption choices Firm’s production technology Cost constraints Input and output choices + + ↓↓ Demand? Supply?
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From consumption to production Consumer’s preference Budget & other constraints Consumption choices Firm’s production technology Cost constraints Input and output choices + + ↓↓ U-maximization Or EU-maximization Profit-maximization
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From consumption to production Consumer’s preference Budget & other constraints Consumption choices Firm’s production technology Cost constraints Input and output choices + + ↓↓ Demand? Supply?
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Some terminologies Factors of production Inputs into the production process Land, Labour, Capital, Entrepreneurship, etc. Production function Land Labour Capital Entrepreneurship Other inputs Outputs
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Some terminologies Factors of production Inputs into the production process Land, Labour, Capital, Entrepreneurship, etc. Production function Land Labour Capital Entrepreneurship Other inputs Outputs e.g., q = F(K,L)
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Some terminologies Short-run vs Long-run Short-run, one or more inputs are fixed. Long-run, every inputs are variable. Land Labour Capital Entrepreneurship Other inputs Outputs e.g., q = F(K,L)
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Some terminologies Short-run vs Long-run a matter of the context. For some industries, 1 year is long-run (newstands), for others, 10 years. (Pharmaceutical, for instance) Land Labour Capital Entrepreneurship Other inputs Outputs e.g., q = F(K,L)
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Production with 1 Variable E.g., fixed every factors except labour. Land Labour Capital Entrepreneurship Other inputs Outputs e.g., q = F(K,L) = f(L)
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Production with 1 Variable Average product = outputs/labour =q/L Marginal product = outputs/ labour = q/ L Land Labour Capital Entrepreneurship Other inputs Outputs (q) e.g., q = F(K,L) = f(L)
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Example: A table
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Example: A table Observations: When labor is zero, output is zero as well With additional workers, output ( q ) increases up to 8 units of labor.
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This note was uploaded on 02/19/2011 for the course ECON 1011 taught by Professor Travisng during the Fall '08 term at CUHK.

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Slide_06 - ECO1011B Basic Micro th set of slides 6 Travis...

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