Lecture 11 - Lecture 11 Production II When thou cuttest...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 11 Production II When thou cuttest down thine harvest in thy field, and hast forgot a sheaf in the field, thou shalt not go again to fetch it: it shall be for the stranger, for the fatherless, and for the widow: that the LORD thy God may bless thee in all the work of thine hands. When thou beatest thine olive tree, thou shalt not go over the boughs again: it shall be for the stranger, for the fatherless, and for the widow. When thou gatherest the grapes of thy vineyard, thou shalt not glean it afterward: it shall be for the stranger, for the fatherless, and for the widow. Deuteronomy 24:19-21 The Economics Outline 1. Diminishing RTS 2. Cross Productivity Effects 3. Returns to Scale 4. Four Production Functions 5. Output Elasticity w.r.t. an Input The Mathematics Outline 1. Some Calculus and Algebra 2. Homogeneity Diminishing Marginal Rate of Technical Substitution Last time we developed concept of the RTS L,K with the following definition: K L K L q q K L f f MP MP dL dK RTS = = = = 0 , Looking at how RTS L,K changes as we move along the isoquant, we consider the following equation: dL f f d dL dRTS K L K L ) / ( , = Remembering that and are functions of both K and L and that K will change as L changes along the isoquant (in essence, K is a function of L), we have L f K f dL dK f f L f LK LL L + = and dL dK f f L f KK KL K + = Dr. Steven Waters Econ 380 Page 1 of 7
Background image of page 1

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

View Full DocumentRight Arrow Icon
L11: Production II therefore, 2 , K KK KL L LK LL K K L f dL dK f f f dL dK f f f dL dRTS + + = Now, we can rearrange this by remembering that Young’s Theorem tells us and we know that along the isoquant KL LK f f = K L f f
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

Lecture 11 - Lecture 11 Production II When thou cuttest...

This preview shows document pages 1 - 3. Sign up to view the full document.

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