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EC4004 2008 Lecture 9 Production
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EC4004 2008 Lecture 9 Production

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  • 1. EC4004 Lecture 9 Production Dr Stephen Kinsella
  • 2. Last Time
  • 3. Game Theory
  • 4. {Players, Strategies, Payoffs} Nash Eqm, Subgame Perf . Eqm Backward Induction Prisoner’s Dilemma Matching Pennies Battle of Sexes
  • 5. Production.
  • 6. ?
  • 7. Production Function
  • 8. production function, a mathematical relationship between inputs and outputs.
  • 9. Combine Capital
  • 10. Combine Capital
  • 11. Combine Capital
  • 12. Combine Capital and Labour
  • 13. Combine Capital and Labour to produce output
  • 14. q :output of a particular good during a period, K: capital used L: labour input M: raw materials
  • 15. Marginal Products
  • 16. Diminishing Marginal Product
  • 17. Relationship between Output and Labour Inputs Holding Other Inputs Constant Output Total per week Output (a) Total output L* Labor input MPL per week L* (b) Marginal product Labor input per week
  • 18. Isoquant Maps
  • 19. Capital per week KA A KB B q = 10 Labour 0 LA LB per week
  • 20. Capital per week KA A q = 30 q = 20 KB B q = 10 Labour 0 LA LB per week
  • 21. Rate of Technical Substitution
  • 22. The RTS and Marginal Products
  • 23. Demo
  • 24. Remember: Diminishing Marginal Utility, Indifference Curves, Marginal Rate of Substitution
  • 25. Constant Returns to Scale
  • 26. A Capital per week 4 q = 40 3 q = 30 2 q = 20 1 q = 10 0 1 2 3 4 Labor per week (a) Constant Returns to Scale
  • 27. Decreasing Returns to Scale
  • 28. A Capital A Capital per week per week 4 4 q = 40 3 3 q = 30 q = 30 2 2 q = 20 q = 20 1 1 q = 10 q = 10 Labor Labor 0 1 2 3 4 per week 0 1 2 3 4 per week (a) Constant Returns to Scale (b) Decreasing Returns to Scale
  • 29. Increasing Returns to Scale
  • 30. Capital per week A K2 q2 K1 q1 K0 q0 Labor 0 L0 L1 L2 per week
  • 31. Technical Change Capital per week K1 K0 A q0 q’0 Labor 0 L1 L0 per week
  • 32. Next Time Costs Do 7.1, 7.2, 7.7 Read Chapter 8
  • 33. EC4004 Lecture 9 Production Dr Stephen Kinsella

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