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EC4004 2008 Lecture 9 Production

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EC4004 2008 Lecture 9 Production

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