Chapter9 - MANAGERIAL ECONOMICS An Analysis of Business...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
1 MANAGERIAL ECONOMICS An Analysis of Business Issues Howard Davies and Pun-Lee Lam Published by FT Prentice Hall
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 Chapter 9: Production and Costs Objectives: To examine the relationship between inputs and outputs To identify the most important determinants of cost per unit economies of capacity utilization economies of scale economies of scope learning effects To identify the difficulties involved in the empirical estimation of these effects To explain the unusual features of costs in the information sector
Background image of page 2
3 The Relationship Between Inputs and Outputs The fundamental relationship is that between inputs and outputs - expressed as the production function This can be examined at a number of levels the economy as a whole the industry the firm A number of different mathematical forms can be used to model the relationship Cobb-Douglas: Q = aK a L b translog production function
Background image of page 3

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

View Full DocumentRight Arrow Icon
4 The Cobb-Douglas Example Q = aK a L b : Where K= capital; L = Labour As each individual input (K,L) is increased, output increases, but at a decreasing rate - the principle of diminishing returns - one of the most fundamental economic ideas A production function identifies many different techniques within the same technology
Background image of page 4
5 The Cobb-Douglas Example Q = aK a L b : Where K= capital; L = Labour If (a+b) > 1; economies of scale If (a+b) < 1; diseconomies of scale If (a+b) = 1; constant returns to scale
Background image of page 5

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

View Full DocumentRight Arrow Icon
6 How to Find the Cost Minimizing Way to Produce Each Level of Output? As a mathematical problem, for level of output Q*
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/07/2011 for the course PMBA 2963.2 taught by Professor Stephenchiu during the Spring '03 term at HKU.

Page1 / 23

Chapter9 - MANAGERIAL ECONOMICS An Analysis of Business...

This preview shows document pages 1 - 7. Sign up to view the full document.

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