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Unformatted text preview: 1 Instructor/LIC: Arghya Ghosh Instructor/LIC: Arghya Ghosh Email: a.ghosh@unsw.edu.au Tel: 93851347 Office: ASB 406 Weeks: 7 12 Theme: Production, Firms, Market Structure Technology and Profit Maximization Maximization Chapter 18: Technology Chapter 19: Profit Maximization Technology Production Functions Isoquants Isoquants Marginal Product Returns to Scale Returns to Scale Technical rate of substitution Long run and short run WEEK 7Part I ECON2101S1 2010 3 Technology Technology describes how inputs are converted output. Lecture is being produced by using computer, projector, software, labour PRODUCTION FUNCTION: The maximum amount of output (y) one can produce using amount of output (y) one can produce using inputs x1, x2 , y f(x x ) y = f(x 1 , x 2 , ) WEEK 7Part I ECON2101S1 2010 4 Production Function One input, one output y = f(x) is the production y = f(x) is the production function. y = f(x) y y f(x) y = f(x) is the maximal output level obtainable from x input units. x x from x input units. WEEK 7Part I ECON2101S1 2010 x x Input Level 5 Production Function with more than one input Labour and Capital used for manufacturing production manufacturing production Labour and Land for agricultural production production How are different factors/inputs combined to produce output? combined to produce output? ISOQUANTS : combination of different inputs that produce same different inputs that produce same level of output WEEK 7Part I ECON2101S1 2010 6 2 Fixed Proportion Production Fn Y = Digging holes , X 1 = labourers, X 2 = shovels Y = min (X 1 , X 2 ) , X = 1 X = 1; Y = min (1 1) = 1 X 1 = 1, X 2 = 1; Y = min (1,1) = 1 X 1 = 2, X 2 = 1; Y = min (2,1) = 1 X 1 = 1, X 2 = 2; Y = min (1,2) = 1 1 2 (1,1), (1,2), (2,1) . all these combinations produce 1 unit of output....
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This note was uploaded on 05/17/2011 for the course ECON 2103 taught by Professor No during the Fall '10 term at DeVry NJ.
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