ch 6_Econ 281_Fall_20101

ch 6_Econ 281_Fall_20101 - 1.TheProductionFunction...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
1 1. The Production Function •Marginal and Average Products Isoquants The Marginal Rate of Technical Substitution 2. Technological progress 3. Returns to Scale 4. Special Production functions
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 Definition:   Productive resources, such as labour and  machines, that firms use to manufacture goods and  services are called  inputs  or  factors of production Definition:   The amount of goods and services produces by  the firm is the firm’s  Output Definition:  Production   transforms a set of inputs into a set  of outputs Definition:   technology  determines the quantity of output  that is feasible to attain for a given set of inputs.  
Background image of page 2
3 Definition : The  production function   tells us the  maximum  possible output that can be attained by the firm  for any given quantity of inputs E.g. the production function for the production of cars is a  function of materials (M), machineries (K) and human  labour (L)  Number of Cars= F(M,K,L) PRODUCTION FUNCTION We will always deal with production functions that  transform inputs in ONE output
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 variables in the production function are  flows  (the amount of  the input used  per unit of time ), not  stocks  (the absolute quantity  of the input) Capital refers to  physical capital  use (machineries, equipments  and the likes) and not  financial capital Definition:  A technically efficient firm attains the maximum  possible output from its inputs (using a given technology)
Background image of page 4
5 Total Product Functions Single-input single-output production functions are  called TOTAL PRODUCT FUNCTIONS Total product function: tells us the  maximum  possible  output that can be attained by the firm for any given  quantity of the input, given the technology. Total product curve plots the total product function on a  graph with output quantity on the vertical axis and  quantity of input on the horizontal axis Total product schedule is the tabulated version of the  total product function
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 Figure shows the total product schedule (the table below the graph) and the total product curve The TP curve separates attainable points and unattainable points Total Product (TP) graph  and schedule
Background image of page 6
7 Total Product Functions Single-input single-output production functions are  called  TOTAL PRODUCT FUNCTIONS Hereafter, the only input is labour (L) The production function is Q=F(L) Total product curve plots the total product function on a  graph with output quantity on the vertical axis and  quantity of input on the horizontal axis
Background image of page 7

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

View Full DocumentRight Arrow Icon
8 Q = F(L) TP (per time unit) Production Function L
Background image of page 8
9 Increasing and Decreasing TOTAL Returns (one-input, one-output) INCREASING TOTAL RETURNS happens for the range of the input (Labour) for which Total product
Background image of page 9

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

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/04/2011 for the course ECON 281 taught by Professor Marchand during the Spring '10 term at University of Alberta.

Page1 / 68

ch 6_Econ 281_Fall_20101 - 1.TheProductionFunction...

This preview shows document pages 1 - 10. Sign up to view the full document.

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