The specific Factors Model How much of each good does the economy produce? The economy's output of manufactures depends on how much capital and labor are used in that sector This relationship is summarized by a production function The production function for good X gives the maximum quantities of good X that a firm can produce with various amounts of factor inputs For instance, the production function for manufactures (food) tells us the quantity of manufactures(food) that can be produced given any input of labor and capital (land) Copyright C 2003 Pearson Education, Inc Slide 3-5Copyright © 2003 Pearson Education, Inc. Slide 3-5 • How much of each good does the economy produce? – The economy’s output of manufactures depends on how much capital and labor are used in that sector. • This relationship is summarized by a production function. • The production function for good X gives the maximum quantities of good X that a firm can produce with various amounts of factor inputs. – For instance, the production function for manufactures (food) tells us the quantity of manufactures (food) that can be produced given any input of labor and capital (land). The Specific Factors Model