technology.18b

technology.18b - Econ 100A: Production: Technology, Part II...

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Unformatted text preview: Econ 100A: Production: Technology, Part II (Chapter 18) Thomas G. Koch Fall 2008 Thomas G. Koch Production: Tech (18B) 1(46) Clickers Turn on your clicker Hit a button Thomas G. Koch Production: Tech (18B) 2(46) From last time Talking about technology How firms take inputs (labor, capital) and make outputs Production Function y = f ( x 1 , x 2 , x 3 ,... ) Thomas G. Koch Production: Tech (18B) 3(46) Production Set with One Input Thomas G. Koch Production: Tech (18B) 4(46) In particular MP x 1 = y x 1 = f ( x 1 + x 1 , x 2 ) x 1 Thomas G. Koch Production: Tech (18B) 5(46) Thinking on the Margin How many more iPods will another CSer get me? How many more apples will extra fertilizer get me? Like marginal utility But didnt we need the ratios? MRS? Thomas G. Koch Production: Tech (18B) 6(46) Technical Rate of Substitution Production with two inputs, ( x 1 , x 2 ) How much more of the second input ( x 2 ) do we need to keep output constant ( y ) if we decrease amount of first input ( x 1 ) Thomas G. Koch Production: Tech (18B) 7(46) In Math MP 1 ( x 1 , x 2 ) x 1 + MP 2 ( x 1 , x 2 ) x 2 = y = 0 Rearrange! TRS ( x 1 , x 2 ) = x 2 x 1 =- MP 1 ( x 1 , x 2 ) MP 2 ( x 1 , x 2 ) Thomas G. Koch Production: Tech (18B) 8(46) Our Three Favorite Examples Perfect Substitutes Cobb-Douglas Fixed Proportions Thomas G. Koch Production: Tech (18B) 9(46) Perfect Substitutes Thomas G. Koch Production: Tech (18B) 10(46) Perfect Substitutes f ( x 1 , x 2 ) = A ( x 1 + x 2 ) Marginal Products MP 1 = MP 2 = A Thomas G. Koch Production: Tech (18B) 11(46) TRS for Perfect Substitutes TRS PS ( x 1 , x 2 ) =- A A =- 1 Intuition MPs are constant, so is TRS Thomas G. Koch Production: Tech (18B) 12(46) Cobb-Douglas...
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This note was uploaded on 09/12/2011 for the course ECON 100A/ 100B taught by Professor Staff during the Fall '08 term at UCSB.

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technology.18b - Econ 100A: Production: Technology, Part II...

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