Chapter 18 Technology
Chapter 18 Technology
Inputs and outputs. Factors of production: land,labor,capital, raw materials, and so on
Inputs and outputs. Factors of production: land, labor, capital, raw materials, and so on
A production set p321 Y- Output Y=f(X )production function Production set X=Input
Y = f (X ) = production function Y = Output X = Input Production set A production set p321
Examples of technology (isoquants analysis): o 1 Fixed proportions, o Perfect substitutes, ●Cobb-Douglas。 Figs.p322
Examples of technology (isoquants analysis): ⚫ Fixed proportions, ⚫ Perfect substitutes, ⚫ Cobb-Douglas. ⚫ Figs. p322
Fixed proportion m2 Isoquants X
Isoquants x1 x2 Fixed proportion
Perfect subsitutes X2 Isoquants X1
Isoquants x1 x2 Perfect subsitutes
Assumptions of technology: monotonic (free disposal)
Assumptions of technology: monotonic (free disposal)
and convex.p324 X2 82 (a1/2+b1/2,a2/2+b2/2) 1o% isoquant X1
and convex. p324 (a1 /2 + b1 /2 , a2 /2 + b2 /2) isoquant x1 x2 a2 b2 a1 b1
The marginal product, MP;=dy/dx;.Y is output
The marginal product, MPi = d y / d x i . Y is output
The technical rate of substitution (TRS): o With d y 0 along any isoquant, TRS (Xx)=dx/dx =-MP1(1,x2)/MP2(K1,X2)
The technical rate of substitution (TRS): ⚫With d y = 0 along any isoquant, TRS (x1 , x2 ) = d x2 / d x1 = – MP1 (x1 , x2 ) / MP2 (x1 , x2 )