This document discusses production and the factors that influence a firm's production decisions. It covers the technology of production, production functions, isoquants, production with one and two variable inputs, and returns to scale. Key points include: isoquants show combinations of inputs that produce the same output; production exhibits diminishing marginal returns; marginal rate of technical substitution diminishes as one input is substituted for another; and inputs can exhibit varying degrees of substitutability from perfect to fixed proportions. The law of diminishing returns and how technological progress can increase productivity over time are also examined.
cost of production / Chapter 6(pindyck)RAHUL SINHA
topics covered
•Production and firm
•The production function
•Short run versus Long run
•Production with one variable input(Labour)
•Average product
•Marginal product
•The slopes of the production curve
•Law of diminishing marginal returns
•Production with two variable inputs
•Isoquant
•Isoquant Maps
•Diminishing marginal returns
•Substitution among inputs
•Returns to scale
•Describing returns to scale
The Cobb-Douglas production function is a statistical model that relates the quantity of output to inputs of labor and capital. It is based on an empirical study by Paul Douglas and Charles Cobb of the American manufacturing industry in the 1920s. Their study found that labor contributed about 3/4 and capital about 1/4 to increases in manufacturing production. The Cobb-Douglas production function has several key properties including constant, increasing, or decreasing returns to scale depending on the sum of exponents and that average and marginal products depend on the factor ratio rather than absolute quantities.
The Solow-Swan model assumes constant returns to scale in production using capital and labor. It predicts an economy will reach a steady state equilibrium where the savings rate equals the investment needed to maintain the capital-labor ratio. The key assumptions include diminishing returns to individual inputs, exogenous population growth and technological progress, and savings being a constant fraction of income. The model shows how an economy converges over time to this steady state level of capital per worker and output per worker, regardless of its starting point.
The cost of production/Chapter 7(pindyck)RAHUL SINHA
content
•MEASURING COST: WHICH COSTS MATTER?
•Fixed and variable cost
•Fixed versus sunk cost
•Amortizing Sunk Costs
•Marginal cost
•Average cost
•Determinants of short run cost
•Diminishing marginal returns
•The shapes of cost curves
•The Average–Marginal Relationship
•Costs in a long run
•Cost minimizing input choices
•Isocost lines
•Marginal rate of technical substitution
•Expansion path
•The Inflexibility of Short-Run Production
•Long run average cost
•Economies and Diseconomies of Scale
•The Relationship Between Short-Run and Long-Run Cost
•Break even analysis
This document discusses key economic concepts including consumption, saving, the multiplier effect, investment demand, and how changes in government spending and taxes can impact GDP through the multiplier. It provides examples of how an initial $1,000 change in spending can multiply into $2,000 in total income due to subsequent rounds of spending. It also notes that the size of the multiplier depends on the marginal propensity to consume.
Dokumen tersebut membahas tentang surplus konsumen dan produsen. Surplus konsumen adalah perbedaan antara daya beli konsumen dengan harga pasar, sedangkan surplus produsen adalah perbedaan antara harga pasar yang diterima penjual dengan harga yang mereka tentukan. Dokumen ini juga menjelaskan konsep maksimum dan minimum dari kurva permintaan dan penawaran serta medan transaksi yang terjadi di pasar.
cost of production / Chapter 6(pindyck)RAHUL SINHA
topics covered
•Production and firm
•The production function
•Short run versus Long run
•Production with one variable input(Labour)
•Average product
•Marginal product
•The slopes of the production curve
•Law of diminishing marginal returns
•Production with two variable inputs
•Isoquant
•Isoquant Maps
•Diminishing marginal returns
•Substitution among inputs
•Returns to scale
•Describing returns to scale
The Cobb-Douglas production function is a statistical model that relates the quantity of output to inputs of labor and capital. It is based on an empirical study by Paul Douglas and Charles Cobb of the American manufacturing industry in the 1920s. Their study found that labor contributed about 3/4 and capital about 1/4 to increases in manufacturing production. The Cobb-Douglas production function has several key properties including constant, increasing, or decreasing returns to scale depending on the sum of exponents and that average and marginal products depend on the factor ratio rather than absolute quantities.
The Solow-Swan model assumes constant returns to scale in production using capital and labor. It predicts an economy will reach a steady state equilibrium where the savings rate equals the investment needed to maintain the capital-labor ratio. The key assumptions include diminishing returns to individual inputs, exogenous population growth and technological progress, and savings being a constant fraction of income. The model shows how an economy converges over time to this steady state level of capital per worker and output per worker, regardless of its starting point.
The cost of production/Chapter 7(pindyck)RAHUL SINHA
content
•MEASURING COST: WHICH COSTS MATTER?
•Fixed and variable cost
•Fixed versus sunk cost
•Amortizing Sunk Costs
•Marginal cost
•Average cost
•Determinants of short run cost
•Diminishing marginal returns
•The shapes of cost curves
•The Average–Marginal Relationship
•Costs in a long run
•Cost minimizing input choices
•Isocost lines
•Marginal rate of technical substitution
•Expansion path
•The Inflexibility of Short-Run Production
•Long run average cost
•Economies and Diseconomies of Scale
•The Relationship Between Short-Run and Long-Run Cost
•Break even analysis
This document discusses key economic concepts including consumption, saving, the multiplier effect, investment demand, and how changes in government spending and taxes can impact GDP through the multiplier. It provides examples of how an initial $1,000 change in spending can multiply into $2,000 in total income due to subsequent rounds of spending. It also notes that the size of the multiplier depends on the marginal propensity to consume.
Dokumen tersebut membahas tentang surplus konsumen dan produsen. Surplus konsumen adalah perbedaan antara daya beli konsumen dengan harga pasar, sedangkan surplus produsen adalah perbedaan antara harga pasar yang diterima penjual dengan harga yang mereka tentukan. Dokumen ini juga menjelaskan konsep maksimum dan minimum dari kurva permintaan dan penawaran serta medan transaksi yang terjadi di pasar.
Bab ini membahas teori-teori utama konsumsi, termasuk hipotesis Keynes tentang pengaruh pendapatan saat ini terhadap konsumsi, model pilihan antarwaktu Irving Fisher, hipotesis siklus hidup Franco Modigliani, hipotesis pendapatan permanen Milton Friedman, dan implikasi teori-teori tersebut terhadap perilaku konsumsi.
Teori Konsumsi dengan Hipotesis Siklus Hidup, Kurva Pengeluaran Konsumsi Jangka Panjang dan Jangka Pendek, Teori Konsumsi dengan Hipotesis Pendapatan Relatif, Teori Konsumsi dengan Hipotesis Pendapatan Permanen
Dokumen tersebut membahas tentang inflasi dan pengangguran dalam teori ekonomi makro. Ini mencakup definisi, jenis, pengukuran, penyebab, dan dampak inflasi dan pengangguran serta hubungan antara keduanya yang dijelaskan melalui kurva Phillips. Tujuan utama dokumen ini adalah memberikan pemahaman dasar tentang inflasi dan pengangguran beserta hubungannya.
Teori konsumsi menjelaskan berbagai pendekatan dalam memahami pola konsumsi masyarakat. Teori awal seperti fungsi konsumsi Keynes dan Kuznets berfokus pada pengaruh pendapatan terhadap konsumsi dalam jangka pendek dan panjang. Selanjutnya, teori Duessenbery dan Friedman memperluas pemahaman dengan mempertimbangkan pengaruh pendapatan relatif dan pendapatan permanen terhadap konsumsi. Terakhir, hipotesis siklus hidup me
Dokumen tersebut membahas tentang ekonomi regional dan teori-teori terkait, seperti teori basis ekonomi, teori lokasi Von Thunen dan Weber, serta alat analisis seperti location quotient. Secara ringkas, dokumen menjelaskan bahwa ilmu ekonomi regional mempelajari distribusi kegiatan ekonomi di berbagai wilayah dengan mempertimbangkan faktor seperti biaya transportasi dan upah tenaga kerja.
The life cycle income hypothesis asserts that consumers save and consume based on their optimal consumption pattern over their lifetime, subject to resource constraints. It emphasizes saving during working years to fund consumption in retirement years when income is lower. The hypothesis divides a person's life into three stages - childhood, middle age, and old age - with consumption gradually rising and income peaking in middle age then declining in retirement, resulting in dissaving early and late in life and saving in middle years.
This document discusses the natural rate of unemployment and its causes. It begins by defining the natural rate of unemployment as the average rate around which the actual unemployment rate fluctuates over the business cycle. It then presents a model showing how the natural rate is determined by the rates of job separation and job finding. Frictional unemployment results from the time it takes to search for and transition between jobs, while structural unemployment stems from wage rigidities that prevent wages from adjusting downward to clear the labor market. The document explores factors like minimum wages, unions, efficiency wages, and sectoral shifts that contribute to real wage rigidity and the natural rate of unemployment.
Bab ini membahas bagaimana model Solow dapat diperluas untuk menggabungkan kemajuan teknologi, temuan empiris tentang pertumbuhan ekonomi, dan kebijakan untuk mendorong pertumbuhan. Topik utama termasuk bagaimana kemajuan teknologi dapat dimasukkan ke dalam model Solow, bukti konvergensi pendapatan antar negara, dan kebijakan untuk meningkatkan tingkat tabungan dan mengalokasikan investasi.
Buku ini membahas tentang hubungan antara pasar uang dan pasar barang, termasuk pengaruh tingkat suku bunga terhadap investasi dan output agregat. Juga dibahas tentang permintaan agregat, penawaran agregat, dan inflasi serta bagaimana kebijakan moneter dan fiskal dapat mempengaruhi output dan harga.
This document summarizes Slutsky's analysis of how a price change affects consumer demand. It explains that a price change has both a substitution effect and an income effect on demand. For normal goods, the substitution and income effects reinforce each other, leading to a downward sloping demand curve. For inferior goods, the effects oppose each other, and in rare cases of extreme inferiority (Giffen goods), the income effect can outweigh the substitution effect, causing demand to increase as price rises. Slutsky's analysis uses budget constraints to isolate the substitution and income effects.
Here are the key impacts of an increase in investment demand in a small open economy:
- Investment demand I(r*) increases.
- Saving S does not change.
- Net capital outflow decreases as domestic investment increases and saving remains the same.
- Net exports NX decrease as the trade balance deteriorates to finance the higher investment through net capital inflows.
So in summary, an increase in investment demand leads to a deterioration in the trade balance (lower NX) and lower net capital outflow, while saving remains unchanged.
CHAPTER 5 The Open Economy slide 23
Bab 8 membahas tentang maksimisasi laba dan penawaran bersaing. Perusahaan dalam pasar bersaing sempurna akan memilih output dimana pendapatan marjinal sama dengan biaya marjinal untuk memaksimalkan laba jangka pendek. Kurva penawaran jangka pendek perusahaan bersaing terdiri dari bagian kurva biaya marjinal dimana biaya marjinal lebih besar dari biaya variabel rata-rata.
policy implication of the classical Equilibrium modelShahidMunir33
The document discusses the effects of reducing income taxes according to the classical equilibrium model. It states that reducing income taxes would:
1) Increase disposable income, leading to higher consumption and aggregate demand. Interest rates may also increase as the government issues bonds to replace lost revenue.
2) Increase the real wages of individuals by reducing the percentage of income paid in taxes. This would shift the aggregate labor supply curve to the right, increasing employment and overall output.
3) Shift the aggregate supply curve to the right as well, which would decrease price levels according to the new general equilibrium of the model.
This document discusses production and the factors that influence a firm's production decisions. It covers the technology of production, production functions, isoquants, production with one and two variable inputs, and returns to scale. Key points include: isoquants show combinations of inputs that produce the same output level; production exhibits diminishing marginal returns; marginal product initially increases with additional input but eventually decreases; labor productivity and technological improvements have allowed food supply to outpace population growth, contradicting Malthus' predictions.
1. The document outlines concepts related to production including production functions, efficiency, law of diminishing returns, short-run and long-run production, isoquants, and returns to scale. It provides examples and cases to illustrate these concepts.
2. Key concepts discussed include the production function relating inputs like capital, labor, and land to output. The law of diminishing returns states that adding more of a variable input while holding others fixed initially increases output at a decreasing rate.
3. Isoquants illustrate combinations of inputs that produce the same output level, and the marginal rate of technical substitution measures how inputs can be substituted in production. The document also discusses short-run and long-run analysis and
Bab ini membahas teori-teori utama konsumsi, termasuk hipotesis Keynes tentang pengaruh pendapatan saat ini terhadap konsumsi, model pilihan antarwaktu Irving Fisher, hipotesis siklus hidup Franco Modigliani, hipotesis pendapatan permanen Milton Friedman, dan implikasi teori-teori tersebut terhadap perilaku konsumsi.
Teori Konsumsi dengan Hipotesis Siklus Hidup, Kurva Pengeluaran Konsumsi Jangka Panjang dan Jangka Pendek, Teori Konsumsi dengan Hipotesis Pendapatan Relatif, Teori Konsumsi dengan Hipotesis Pendapatan Permanen
Dokumen tersebut membahas tentang inflasi dan pengangguran dalam teori ekonomi makro. Ini mencakup definisi, jenis, pengukuran, penyebab, dan dampak inflasi dan pengangguran serta hubungan antara keduanya yang dijelaskan melalui kurva Phillips. Tujuan utama dokumen ini adalah memberikan pemahaman dasar tentang inflasi dan pengangguran beserta hubungannya.
Teori konsumsi menjelaskan berbagai pendekatan dalam memahami pola konsumsi masyarakat. Teori awal seperti fungsi konsumsi Keynes dan Kuznets berfokus pada pengaruh pendapatan terhadap konsumsi dalam jangka pendek dan panjang. Selanjutnya, teori Duessenbery dan Friedman memperluas pemahaman dengan mempertimbangkan pengaruh pendapatan relatif dan pendapatan permanen terhadap konsumsi. Terakhir, hipotesis siklus hidup me
Dokumen tersebut membahas tentang ekonomi regional dan teori-teori terkait, seperti teori basis ekonomi, teori lokasi Von Thunen dan Weber, serta alat analisis seperti location quotient. Secara ringkas, dokumen menjelaskan bahwa ilmu ekonomi regional mempelajari distribusi kegiatan ekonomi di berbagai wilayah dengan mempertimbangkan faktor seperti biaya transportasi dan upah tenaga kerja.
The life cycle income hypothesis asserts that consumers save and consume based on their optimal consumption pattern over their lifetime, subject to resource constraints. It emphasizes saving during working years to fund consumption in retirement years when income is lower. The hypothesis divides a person's life into three stages - childhood, middle age, and old age - with consumption gradually rising and income peaking in middle age then declining in retirement, resulting in dissaving early and late in life and saving in middle years.
This document discusses the natural rate of unemployment and its causes. It begins by defining the natural rate of unemployment as the average rate around which the actual unemployment rate fluctuates over the business cycle. It then presents a model showing how the natural rate is determined by the rates of job separation and job finding. Frictional unemployment results from the time it takes to search for and transition between jobs, while structural unemployment stems from wage rigidities that prevent wages from adjusting downward to clear the labor market. The document explores factors like minimum wages, unions, efficiency wages, and sectoral shifts that contribute to real wage rigidity and the natural rate of unemployment.
Bab ini membahas bagaimana model Solow dapat diperluas untuk menggabungkan kemajuan teknologi, temuan empiris tentang pertumbuhan ekonomi, dan kebijakan untuk mendorong pertumbuhan. Topik utama termasuk bagaimana kemajuan teknologi dapat dimasukkan ke dalam model Solow, bukti konvergensi pendapatan antar negara, dan kebijakan untuk meningkatkan tingkat tabungan dan mengalokasikan investasi.
Buku ini membahas tentang hubungan antara pasar uang dan pasar barang, termasuk pengaruh tingkat suku bunga terhadap investasi dan output agregat. Juga dibahas tentang permintaan agregat, penawaran agregat, dan inflasi serta bagaimana kebijakan moneter dan fiskal dapat mempengaruhi output dan harga.
This document summarizes Slutsky's analysis of how a price change affects consumer demand. It explains that a price change has both a substitution effect and an income effect on demand. For normal goods, the substitution and income effects reinforce each other, leading to a downward sloping demand curve. For inferior goods, the effects oppose each other, and in rare cases of extreme inferiority (Giffen goods), the income effect can outweigh the substitution effect, causing demand to increase as price rises. Slutsky's analysis uses budget constraints to isolate the substitution and income effects.
Here are the key impacts of an increase in investment demand in a small open economy:
- Investment demand I(r*) increases.
- Saving S does not change.
- Net capital outflow decreases as domestic investment increases and saving remains the same.
- Net exports NX decrease as the trade balance deteriorates to finance the higher investment through net capital inflows.
So in summary, an increase in investment demand leads to a deterioration in the trade balance (lower NX) and lower net capital outflow, while saving remains unchanged.
CHAPTER 5 The Open Economy slide 23
Bab 8 membahas tentang maksimisasi laba dan penawaran bersaing. Perusahaan dalam pasar bersaing sempurna akan memilih output dimana pendapatan marjinal sama dengan biaya marjinal untuk memaksimalkan laba jangka pendek. Kurva penawaran jangka pendek perusahaan bersaing terdiri dari bagian kurva biaya marjinal dimana biaya marjinal lebih besar dari biaya variabel rata-rata.
policy implication of the classical Equilibrium modelShahidMunir33
The document discusses the effects of reducing income taxes according to the classical equilibrium model. It states that reducing income taxes would:
1) Increase disposable income, leading to higher consumption and aggregate demand. Interest rates may also increase as the government issues bonds to replace lost revenue.
2) Increase the real wages of individuals by reducing the percentage of income paid in taxes. This would shift the aggregate labor supply curve to the right, increasing employment and overall output.
3) Shift the aggregate supply curve to the right as well, which would decrease price levels according to the new general equilibrium of the model.
This document discusses production and the factors that influence a firm's production decisions. It covers the technology of production, production functions, isoquants, production with one and two variable inputs, and returns to scale. Key points include: isoquants show combinations of inputs that produce the same output level; production exhibits diminishing marginal returns; marginal product initially increases with additional input but eventually decreases; labor productivity and technological improvements have allowed food supply to outpace population growth, contradicting Malthus' predictions.
1. The document outlines concepts related to production including production functions, efficiency, law of diminishing returns, short-run and long-run production, isoquants, and returns to scale. It provides examples and cases to illustrate these concepts.
2. Key concepts discussed include the production function relating inputs like capital, labor, and land to output. The law of diminishing returns states that adding more of a variable input while holding others fixed initially increases output at a decreasing rate.
3. Isoquants illustrate combinations of inputs that produce the same output level, and the marginal rate of technical substitution measures how inputs can be substituted in production. The document also discusses short-run and long-run analysis and
Production involves using inputs like capital, labor, and machinery to produce outputs. There are fixed and variable inputs. The production function expresses the relationship between inputs and outputs, showing the maximum output possible given inputs. It can take various forms like linear or cubic. There are assumptions for production functions like constant technology. In the short run, there are three stages of production depending on input levels. The long run production function shows returns to scale like increasing, decreasing, or constant based on output changes from input changes. Economies of scale can result from larger scale production.
This document discusses key concepts in production economics including the four basic categories of inputs (labor, capital, land, materials), production functions, fixed vs variable inputs, short run vs long run, marginal product of labor, total product of labor, average product of labor, and the law of diminishing marginal returns. It also explains isoquants and how they relate to different types of production functions including Cobb-Douglas, perfect complements, and perfect substitutes. Key terms discussed are marginal rate of technical substitution and how technological change and productivity can affect production functions.
The document discusses production functions and their classification. It defines a production function as showing the maximum output that can be produced from alternative input combinations. Production functions are classified as short-run or long-run depending on whether one input is fixed. The short-run production function describes output with one fixed input, like capital, while the long-run allows variation in both inputs. Total, average and marginal products are also discussed and their relationships explained.
Isoquants, MRTS, Concept of Total Product, Average & Marginal Product, Short Run and Long Run analysis of production, The Law of Variable proportion, Returns to scale,
Production Cost – Concept of Cost, Classification of Short run cost – Long run cost,
Production Function,Cost Concepts & Cost-Output analysisVenkat. P
Production Function, Cobb-Douglas Production function, Iso-quants and Iso-costs, MRTS, Least Cost Combination of Inputs, Laws of Returns, Internal and External Economies of Scale
Cost concepts, Determinants of cost
cost-output relationship in short run and Long run, Objectives, Assumptions of BEA
Graphical representation, Importance, Limitations of BEA
Unit - IV discusses production functions and the laws of production. It explains that a production function shows the relationship between inputs like labor, capital, land and the output produced. The laws of variable proportions and returns to scale are then covered. The law of variable proportions explains how output changes when one input is varied while others stay fixed. Returns to scale looks at what happens to output when all inputs change proportionately. Economies and diseconomies of scale are also discussed.
This document provides an outline and introduction for a chapter on producer behavior. It will cover the basics of production, production in the short run and long run, the firm's cost minimization problem, returns to scale, and technological change. The introduction poses three key questions about how firms make production decisions. The chapter will use production functions, isoquants, isocost lines and other concepts to analyze the firm's optimization problems and how supply responds to market conditions.
This document discusses production functions and the laws of production. It defines production as the transformation of inputs into outputs of goods and services. There are two types of production functions - fixed and variable proportions. The law of variable proportions describes the relationship between varying input levels and output in the short run when one input is variable. Diminishing marginal returns typically occur as more of the variable input is added due to scarcity of the fixed inputs. Isoquants illustrate combinations of two variable inputs that produce the same output level.
The document discusses production functions and the law of variable proportions. It defines production functions as relationships between inputs and outputs. Specifically, it discusses Cobb-Douglas production functions, which take the form of a power equation relating capital and labor to output. Isoquants and isocosts are also introduced as showing equal levels of output and cost from different input combinations. The law of variable proportions is summarized as explaining how adding more of a variable input initially increases then decreases marginal returns in the short run when one input is fixed.
Es 2 k21-18 returns to scale ppt naveen chouhanNaveenChouhan13
Returns to scale refers to the relationship between changes in total input and the resulting changes in total output. There are three types of returns to scale: increasing, constant, and diminishing. Increasing returns occur when a proportional increase in all inputs results in a more than proportional increase in output. Constant returns occur when output increases proportionally to inputs. Diminishing returns occur when output increases by less than the proportional increase in inputs. The law of returns to scale explains how output responds to proportional changes in all inputs in the long run.
The document discusses theories of production, including:
1. It defines production function and outlines concepts like inputs, outputs, fixed vs variable inputs, and short vs long run.
2. It summarizes the law of variable proportions and returns to scale, and how they relate to costs via concepts like economies and diseconomies of scale.
3. It provides an overview of oligopoly market structure and models for price and output determination under conditions like collusion, price leadership, and kinked demand curves.
The document discusses the production function and factors of production. It defines the production function as describing the maximum output that can be produced from different combinations of inputs given the state of technology. In the short run, at least one factor is fixed, while in the long run all factors are variable. The production function shows diminishing marginal returns as the variable input increases with other inputs held fixed. Isoquants illustrate different combinations of inputs that produce the same output level. The marginal rate of technical substitution measures the rate at which inputs can be substituted while maintaining output.
This document defines production and costs, and discusses the theory of production and cost. It covers:
1) Definitions of production, inputs, production functions, and the relationship between inputs and output.
2) The characteristics of short-run and long-run production periods and production functions.
3) The measurement of total product, average product, and marginal product and how they relate at different stages of production.
4) Cost concepts including total, fixed, variable, marginal, average, and their relationships as depicted through cost curves.
The document discusses the theory of producer behavior and costs. It defines key concepts like production functions, returns to scale, and costs including fixed, variable, average, marginal, and total costs. It explains the relationships between these different cost concepts and how average and marginal costs change with output quantity. Cost curves like average total cost are also examined and shown to typically be U-shaped. Factors that influence costs like diminishing marginal returns are explained. Profit maximization when marginal revenue equals marginal cost is also covered.
production analysis by Neeraj Bhandari ( Surkhet.Nepal )Neeraj Bhandari
This document discusses key concepts in production analysis including the production possibility curve (PPC), inputs and outputs, fixed and variable inputs, and short and long run time periods. It also explains the production function and how total product, marginal product, and average product are determined by the quantity of labor input based on the law of variable proportions. Finally, it covers the different types of returns to scale including increasing, constant, and diminishing returns based on how total output changes with proportional increases in all factor inputs in the long run.
Production analysis by Neeraj Bhandari ( Surkhet.Nepal )Neeraj Bhandari
This document discusses key concepts in production analysis including the production possibility curve (PPC), inputs and outputs, fixed and variable inputs, and short and long run time periods. It also explains the production function and how total product, marginal product, and average product are determined by the quantity of labor input based on the law of variable proportions. Finally, it covers the concept of returns to scale and how total output can increase more than, equal to, or less than proportionately based on increasing, constant, and diminishing returns to scale respectively in the long run.
This document provides an introduction to production concepts and analysis. It defines key terms like production function, inputs, outputs, isoquants, and marginal rate of technical substitution.
The production function expresses the relationship between various inputs (like labor, capital, land) and the level of output. Isoquants show the different combinations of two inputs (like labor and capital) that can produce the same level of output. The marginal rate of technical substitution measures how much one input must be reduced to compensate for an increase in another input while maintaining the same output level.
The document also discusses measures of production like total, average, and marginal products and how they are used to analyze changes in output from changes in a
The document discusses production concepts and cost analysis, including:
- Production functions show the relationship between inputs and outputs. Common types include Cobb-Douglas, CES, and Leontief functions.
- Total, average, and marginal products are defined for analyzing how output changes with variable inputs like labor.
- Short-run and long-run periods are distinguished based on whether inputs are fixed or variable.
- Isoquants and isocost lines are introduced to explain the concept of producer equilibrium between inputs.
This document summarizes a study that determined the water requirements, crop coefficients, and effects of deficit irrigation on hot pepper growth. The study found that:
1) Hot pepper requires about 587mm of water over the growing season under full irrigation.
2) The crop coefficients at different growth stages under full irrigation were 0.47, 0.86, 1.42, and 0.91.
3) Deficit irrigation of up to 20% (80% water requirement) had no significant effects on pepper growth, development, or fruiting.
Proposal ini membahas rencana pengembangan sistem informasi manajemen jemaat dan keuangan Gereja Kristen Indonesia. Sistem ini dirancang untuk mengelola data jemaat, kegiatan, dan keuangan gereja serta menyajikan laporan statistik. Spesifikasi sistem dan rencana pelaksanaan pengembangan sistem dalam proposal ini mencakup tahapan analisis kebutuhan, desain, pengujian, hingga implementasi.
Dokumen tersebut merupakan laporan praktikum mahasiswa Fakultas Pertanian Universitas Gadjah Mada mengenai Dasar-Dasar Penyuluhan dan Komunikasi Pertanian. Laporan tersebut berisi analisis artikel dari situs web/blog yang meliputi nilai penyuluhan, sumber teknologi/ide, sasaran, manfaat, dan nilai pendidikan yang terkandung dalam artikel tersebut. Mahasiswa diminta untuk menuliskan ringkasan dan penjelasan nilai ber
Ringkasan dokumen tersebut adalah:
1. Dokumen tersebut merupakan contoh proposal penelitian yang menguji pengaruh nilai tukar rupiah dan suku bunga terhadap cadangan primer dan kredit bank Mandiri.
2. Tujuan penelitian adalah menganalisis pengaruh nilai tukar rupiah dan suku bunga terhadap dua variabel tersebut.
3. Metodologi penelitian menggunakan data sekunder dari berbagai sumber untuk variabel terikat
Dokumen tersebut membahas tentang ekofisiologi pertumbuhan dan hasil tanaman teh. Terdapat tiga proses utama yang berkaitan dengan hasil teh yaitu fotosintesis, pertumbuhan pucuk, dan hubungan air tanaman. Fotosintesis dipengaruhi oleh kadar nitrogen dan intensitas cahaya, dimana tingkat maksimum cahaya yang menyebabkan kejenuhan fotosintesis bervariasi antar genotipe.
Analisis Sistem Pemanfaatan Lahan Pertanian (ALUSA) digunakan untuk mengevaluasi kesesuaian lahan untuk penggunaan lahan tertentu dengan mempertimbangkan faktor-faktor fisik, sosial, dan ekonomi guna perencanaan penggunaan lahan yang berkelanjutan. ALUSA melibatkan survei sumber daya alam, penentuan satuan pemetaan lahan, identifikasi tipe penggunaan lahan yang relevan, dan klasifikasi kesesuaian lahan
Dokumen tersebut membahas tentang konsep keanekaragaman hayati (biodiversity) yang mencakup tingkat genetik, spesies, dan ekosistem. Dokumen juga menjelaskan pentingnya melestarikan biodiversity karena bermanfaat bagi makanan, obat-obatan, dan kemampuan alam dalam beradaptasi dengan perubahan lingkungan. Sayangnya, berbagai ancaman seperti kerusakan habitat, polusi, perubahan iklim, dan overeksploitasi sumber daya
Dokumen tersebut memberikan penjelasan mengenai site dan mode of action dari herbisida. Secara singkat:
1. Herbisida dapat masuk ke tumbuhan melalui permukaan daun dan akar, lalu diangkut ke seluruh bagian tumbuhan.
2. Herbisida bekerja dengan merusak proses fisiologi seperti pembelahan sel, pembentukan jaringan, dan metabolisme seperti fotosintesis dan pernafasan.
3. Efek herbisida bergantung pada l
Dokumen tersebut membahas tentang peran seed bank sebagai penyimpan biji gulma dan faktor-faktor yang mempengaruhinya. Seed bank berperan sebagai penyimpan biji gulma untuk musim berikutnya, agen penyebaran gulma, dan perlindungan biji selama kondisi tidak menguntungkan. Produksi biji gulma dipengaruhi oleh karakteristik gulma semusim dan faktor lingkungan seperti hara, kelembaban, dan penyinaran. Pengol
Dokumen tersebut membahas program manajemen gulma yang terintegrasi dengan tiga komponen utama yaitu pencegahan, pengendalian, dan pengurangan kompetisi gulma-tanaman. Program tersebut mencakup upaya budidaya tanaman, pengolahan tanah, dan pengendalian gulma untuk mengurangi produksi biji dan propagule gulma serta mencegah tumbuhnya gulma di pertanaman.
The document discusses the relationship between photosynthetic capacity and tea yield. While some studies found no direct link, others argue that assimilate supply can limit yield under conditions like photoinhibition. Tea yield is primarily controlled by shoot initiation and extension rates, which are influenced by temperature, vapor pressure deficit, and shoot turgor rather than current photosynthetic rates. However, time-integrated photosynthesis and yield may be positively correlated. Respiration rates are also high in tea plants, with up to 85% of photosynthates used for respiration rather than growth.
Dokumen tersebut membahas tentang niche differentiation dan suksesi gulma dalam komunitas tumbuhan. Beberapa poin penting yang dijelaskan adalah perbedaan distribusi vertikal dan horizontal antar spesies dalam komunitas, prinsip kompetisi Gause, dan model-model suksesi vegetasi seperti model fasilitasi, toleransi, dan inhibisi berdasarkan tekanan kompetisi antar spesies. "
Dokumen tersebut membahas tentang mata kuliah Manajemen Gulma pada Fakultas Pertanian UGM. Mata kuliah ini akan membahas tentang seed bank dan suksesi komunitas gulma, interaksi antara gulma dan tanaman, serta program-program manajemen gulma yang efisien. Dokumen juga menjelaskan definisi gulma dan ekologi gulma beserta faktor-faktor lingkungan yang mempengaruhinya. Interaksi antara gulma dan tanaman dalam memperebutkan sum
This document discusses the relationship between photosynthetic capacity and tea yield. While some studies found no direct link, others argue that assimilate supply can limit yield under certain conditions like photoinhibition. Tea yield is primarily controlled by shoot initiation and extension rates, which are influenced by temperature, vapor pressure deficit, and shoot turgor rather than current photosynthetic rates. Respiration rates are also high in tea plants, consuming over half of photosynthates. Root systems vary between seedlings and clones, with depth being an important factor in drought tolerance. Water use in tea is determined by the balance between water absorption and transpiration.
Pertanian berkelanjutan melibatkan pengelolaan sumber daya alam secara bijaksana untuk memenuhi kebutuhan manusia saat ini tanpa mengorbankan kemampuan generasi masa depan. Pertanian harus memperhatikan aspek ekologi, ekonomi, dan sosial untuk dapat berlangsung secara berkelanjutan. Tantangan utama adalah bagaimana memenuhi kebutuhan manusia tanpa merusak lingkungan.
LAND USE LAND COVER AND NDVI OF MIRZAPUR DISTRICT, UPRAHUL
This Dissertation explores the particular circumstances of Mirzapur, a region located in the
core of India. Mirzapur, with its varied terrains and abundant biodiversity, offers an optimal
environment for investigating the changes in vegetation cover dynamics. Our study utilizes
advanced technologies such as GIS (Geographic Information Systems) and Remote sensing to
analyze the transformations that have taken place over the course of a decade.
The complex relationship between human activities and the environment has been the focus
of extensive research and worry. As the global community grapples with swift urbanization,
population expansion, and economic progress, the effects on natural ecosystems are becoming
more evident. A crucial element of this impact is the alteration of vegetation cover, which plays a
significant role in maintaining the ecological equilibrium of our planet.Land serves as the foundation for all human activities and provides the necessary materials for
these activities. As the most crucial natural resource, its utilization by humans results in different
'Land uses,' which are determined by both human activities and the physical characteristics of the
land.
The utilization of land is impacted by human needs and environmental factors. In countries
like India, rapid population growth and the emphasis on extensive resource exploitation can lead
to significant land degradation, adversely affecting the region's land cover.
Therefore, human intervention has significantly influenced land use patterns over many
centuries, evolving its structure over time and space. In the present era, these changes have
accelerated due to factors such as agriculture and urbanization. Information regarding land use and
cover is essential for various planning and management tasks related to the Earth's surface,
providing crucial environmental data for scientific, resource management, policy purposes, and
diverse human activities.
Accurate understanding of land use and cover is imperative for the development planning
of any area. Consequently, a wide range of professionals, including earth system scientists, land
and water managers, and urban planners, are interested in obtaining data on land use and cover
changes, conversion trends, and other related patterns. The spatial dimensions of land use and
cover support policymakers and scientists in making well-informed decisions, as alterations in
these patterns indicate shifts in economic and social conditions. Monitoring such changes with the
help of Advanced technologies like Remote Sensing and Geographic Information Systems is
crucial for coordinated efforts across different administrative levels. Advanced technologies like
Remote Sensing and Geographic Information Systems
9
Changes in vegetation cover refer to variations in the distribution, composition, and overall
structure of plant communities across different temporal and spatial scales. These changes can
occur natural.
How to Make a Field Mandatory in Odoo 17Celine George
In Odoo, making a field required can be done through both Python code and XML views. When you set the required attribute to True in Python code, it makes the field required across all views where it's used. Conversely, when you set the required attribute in XML views, it makes the field required only in the context of that particular view.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
আমাদের সবার জন্য খুব খুব গুরুত্বপূর্ণ একটি বই ..বিসিএস, ব্যাংক, ইউনিভার্সিটি ভর্তি ও যে কোন প্রতিযোগিতা মূলক পরীক্ষার জন্য এর খুব ইম্পরট্যান্ট একটি বিষয় ...তাছাড়া বাংলাদেশের সাম্প্রতিক যে কোন ডাটা বা তথ্য এই বইতে পাবেন ...
তাই একজন নাগরিক হিসাবে এই তথ্য গুলো আপনার জানা প্রয়োজন ...।
বিসিএস ও ব্যাংক এর লিখিত পরীক্ষা ...+এছাড়া মাধ্যমিক ও উচ্চমাধ্যমিকের স্টুডেন্টদের জন্য অনেক কাজে আসবে ...
Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
How to Fix the Import Error in the Odoo 17Celine George
An import error occurs when a program fails to import a module or library, disrupting its execution. In languages like Python, this issue arises when the specified module cannot be found or accessed, hindering the program's functionality. Resolving import errors is crucial for maintaining smooth software operation and uninterrupted development processes.
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...PECB
Denis is a dynamic and results-driven Chief Information Officer (CIO) with a distinguished career spanning information systems analysis and technical project management. With a proven track record of spearheading the design and delivery of cutting-edge Information Management solutions, he has consistently elevated business operations, streamlined reporting functions, and maximized process efficiency.
Certified as an ISO/IEC 27001: Information Security Management Systems (ISMS) Lead Implementer, Data Protection Officer, and Cyber Risks Analyst, Denis brings a heightened focus on data security, privacy, and cyber resilience to every endeavor.
His expertise extends across a diverse spectrum of reporting, database, and web development applications, underpinned by an exceptional grasp of data storage and virtualization technologies. His proficiency in application testing, database administration, and data cleansing ensures seamless execution of complex projects.
What sets Denis apart is his comprehensive understanding of Business and Systems Analysis technologies, honed through involvement in all phases of the Software Development Lifecycle (SDLC). From meticulous requirements gathering to precise analysis, innovative design, rigorous development, thorough testing, and successful implementation, he has consistently delivered exceptional results.
Throughout his career, he has taken on multifaceted roles, from leading technical project management teams to owning solutions that drive operational excellence. His conscientious and proactive approach is unwavering, whether he is working independently or collaboratively within a team. His ability to connect with colleagues on a personal level underscores his commitment to fostering a harmonious and productive workplace environment.
Date: May 29, 2024
Tags: Information Security, ISO/IEC 27001, ISO/IEC 42001, Artificial Intelligence, GDPR
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A review of the growth of the Israel Genealogy Research Association Database Collection for the last 12 months. Our collection is now passed the 3 million mark and still growing. See which archives have contributed the most. See the different types of records we have, and which years have had records added. You can also see what we have for the future.
This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
हिंदी वर्णमाला पीपीटी, hindi alphabet PPT presentation, hindi varnamala PPT, Hindi Varnamala pdf, हिंदी स्वर, हिंदी व्यंजन, sikhiye hindi varnmala, dr. mulla adam ali, hindi language and literature, hindi alphabet with drawing, hindi alphabet pdf, hindi varnamala for childrens, hindi language, hindi varnamala practice for kids, https://www.drmullaadamali.com
Main Java[All of the Base Concepts}.docxadhitya5119
This is part 1 of my Java Learning Journey. This Contains Custom methods, classes, constructors, packages, multithreading , try- catch block, finally block and more.
Executive Directors Chat Leveraging AI for Diversity, Equity, and InclusionTechSoup
Let’s explore the intersection of technology and equity in the final session of our DEI series. Discover how AI tools, like ChatGPT, can be used to support and enhance your nonprofit's DEI initiatives. Participants will gain insights into practical AI applications and get tips for leveraging technology to advance their DEI goals.
2. Chapter 6 Slide 2
Topics to be Discussed
The Technology of Production
Isoquants
Production with One Variable Input
(Labor)
Production with Two Variable Inputs
Returns to Scale
3. Chapter 6 Slide 3
Introduction
Our focus is the supply side.
The theory of the firm will address:
How a firm makes cost-minimizing
production decisions
How cost varies with output
Characteristics of market supply
Issues of business regulation
4. Chapter 6 Slide 4
The Technology of Production
The Production Process
Combining inputs or factors of production
to achieve an output
Categories of Inputs (factors of
production)
Labor
Materials
Capital
5. Chapter 6 Slide 5
The Technology of Production
Production Function:
Indicates the highest output that a firm can
produce for every specified combination of
inputs given the state of technology.
Shows what is technically feasible when
the firm operates efficiently.
6. Chapter 6 Slide 6
The Technology of Production
The production function for two inputs:
Q = F(K,L)
Q = Output, K = Capital, L = Labor
For a given technology
7. Chapter 6 Slide 7
Isoquants
Assumptions
Food producer has two inputs
Labor (L) & Capital (K)
8. Chapter 6 Slide 8
Isoquants
Observations:
1) For any level of K, output increases
with more L.
2) For any level of L, output increases
with more K.
3) Various combinations of inputs
produce the same output.
9. Chapter 6 Slide 9
Isoquants
Isoquants
Curves showing all possible combinations
of inputs that yield the same output
11. Chapter 6 Slide
Production with Two Variable Inputs (L,K)
Labor per year
1
2
3
4
1 2 3 4 5
5
Q1 = 55
The isoquants are derived
from the production
function for output of
of 55, 75, and 90.A
D
B
Q2 = 75
Q3 = 90
C
E
Capital
per year The Isoquant MapThe Isoquant Map
12. Chapter 6 Slide
Isoquants
The isoquants emphasize how different
input combinations can be used to
produce the same output.
This information allows the producer to
respond efficiently to changes in the
markets for inputs.
Input FlexibilityInput Flexibility
13. Chapter 6 Slide
Isoquants
Short-run:
Period of time in which quantities of one or
more production factors cannot be
changed.
These inputs are called fixed inputs.
The Short Run versus the Long RunThe Short Run versus the Long Run
14. Chapter 6 Slide
Isoquants
Long-run
Amount of time needed to make all
production inputs variable.
The Short Run versus the Long RunThe Short Run versus the Long Run
15. Chapter 6 Slide
Amount Amount Total Average Marginal
of Labor (L) of Capital (K) Output (Q) Product Product
Production with
One Variable Input (Labor)
0 10 0 --- ---
1 10 10 10 10
2 10 30 15 20
3 10 60 20 30
4 10 80 20 20
5 10 95 19 15
6 10 108 18 13
7 10 112 16 4
8 10 112 14 0
9 10 108 12 -4
10 10 100 10 -8
16. Chapter 6 Slide
Observations:
1) With additional workers, output (Q)
increases, reaches a maximum, and
then decreases.
Production with
One Variable Input (Labor)
17. Chapter 6 Slide
Observations:
2) The average product of labor (AP),
or output per worker, increases and
then decreases.
L
Q
InputLabor
Output
AP ==
Production with
One Variable Input (Labor)
18. Chapter 6 Slide
Observations:
3) The marginal product of labor (MP),
or output of the additional worker,
increases rapidly initially and then
decreases and becomes negative..
L
Q
InputLabor
Output
MPL
∆
∆
=
∆
∆
=
Production with
One Variable Input (Labor)
19. Chapter 6 Slide
Total Product
A: slope of tangent = MP (20)
B: slope of OB = AP (20)
C: slope of OC= MP & AP
Labor per Month
Output
per
Month
60
112
0 2 3 4 5 6 7 8 9 101
A
B
C
D
Production with
One Variable Input (Labor)
20. Chapter 6 Slide
Average Product
Production with
One Variable Input (Labor)
8
10
20
Outpu
t
per
Month
0 2 3 4 5 6 7 9 101 Labor per Month
30
E
Marginal Product
Observations:
Left of E: MP > AP & AP is increasing
Right of E: MP < AP & AP is decreasing
E: MP = AP & AP is at its maximum
21. Chapter 6 Slide
Observations:
When MP = 0, TP is at its maximum
When MP > AP, AP is increasing
When MP < AP, AP is decreasing
When MP = AP, AP is at its maximum
Production with
One Variable Input (Labor)
22. Production with
One Variable Input (Labor)
Labor
per Month
Output
per
Month
60
112
0 2 3 4 5 6 7 8 9 101
A
B
C
D
8
10
20
E
0 2 3 4 5 6 7 9 101
30
Output
per
Month
Labor
per Month
AP = slope of line from origin to a point on TP, lines b, & c.
MP = slope of a tangent to any point on the TP line, lines a & c.
23. Chapter 6 Slide
As the use of an input increases in
equal increments, a point will be
reached at which the resulting additions
to output decreases (i.e. MP declines).
Production with
One Variable Input (Labor)
The Law of Diminishing Marginal ReturnsThe Law of Diminishing Marginal Returns
24. Chapter 6 Slide
When the labor input is small, MP
increases due to specialization.
When the labor input is large, MP
decreases due to inefficiencies.
The Law of Diminishing Marginal ReturnsThe Law of Diminishing Marginal Returns
Production with
One Variable Input (Labor)
25. Chapter 6 Slide
Can be used for long-run decisions to
evaluate the trade-offs of different plant
configurations
Assumes the quality of the variable
input is constant
The Law of Diminishing Marginal ReturnsThe Law of Diminishing Marginal Returns
Production with
One Variable Input (Labor)
26. Chapter 6 Slide
Explains a declining MP, not
necessarily a negative one
Assumes a constant technology
The Law of Diminishing Marginal ReturnsThe Law of Diminishing Marginal Returns
Production with
One Variable Input (Labor)
27. Chapter 6 Slide
The Effect of
Technological Improvement
Labor per
time period
Output
per
time
period
50
100
0 2 3 4 5 6 7 8 9 101
A
O1
C
O3
O2
B
Labor productivity
can increase if there
are improvements in
technology, even though
any given production
process exhibits
diminishing returns to
labor.
28. Chapter 6 Slide
Malthus predicted mass hunger and
starvation as diminishing returns limited
agricultural output and the population
continued to grow.
Why did Malthus’ prediction fail?
Malthus and the Food Crisis
29. Chapter 6 Slide
Index of World Food
Consumption Per Capita
1948-1952 100
1960 115
1970 123
1980 128
1990 137
1995 135
1998 140
Year Index
30. Chapter 6 Slide
Malthus and the Food Crisis
The data show that production
increases have exceeded population
growth.
Malthus did not take into consideration
the potential impact of technology which
has allowed the supply of food to grow
faster than demand.
31. Chapter 6 Slide
Malthus and the Food Crisis
Technology has created surpluses and
driven the price down.
Question
If food surpluses exist, why is there
hunger?
32. Chapter 6 Slide
Malthus and the Food Crisis
Answer
The cost of distributing food from
productive regions to unproductive regions
and the low income levels of the non-
productive regions.
33. Chapter 6 Slide
Labor Productivity
InputLaborTotal
OutputTotal
tyProductiviAverage =
Production with
One Variable Input (Labor)
34. Chapter 6 Slide
Labor Productivity and the Standard of
Living
Consumption can increase only if
productivity increases.
Determinants of Productivity
Stock of capital
Technological change
Production with
One Variable Input (Labor)
35. Chapter 6 Slide
Labor Productivity in
Developed Countries
1960-1973 4.75 4.04 8.30 2.89 2.36
1974-1986 2.10 1.85 2.50 1.69 0.71
1987-1997 1.48 2.00 1.94 1.02 1.09
United United
France Germany Japan Kingdom States
Annual Rate of Growth of Labor Productivity (%)
$54,507 $55,644 $46,048 $42,630 $60,915
Output per Employed Person (1997)
36. Chapter 6 Slide
Trends in Productivity
1) U.S. productivity is growing at a
slower rate than other countries.
2) Productivity growth in developed
countries has been decreasing.
Production with
One Variable Input (Labor)
37. Chapter 6 Slide
Explanations for Productivity Growth
Slowdown
1) Growth in the stock of capital is the
primary determinant of the growth in
productivity.
Production with
One Variable Input (Labor)
38. Chapter 6 Slide
Explanations for Productivity Growth
Slowdown
2) Rate of capital accumulation in the
U.S. was slower than other
developed countries because the
others were rebuilding after WWII.
Production with
One Variable Input (Labor)
39. Chapter 6 Slide
Explanations for Productivity Growth
Slowdown
3) Depletion of natural resources
4) Environment regulations
Production with
One Variable Input (Labor)
40. Chapter 6 Slide
Observation
U.S. productivity has increased in recent
years
What Do You Think?
Is it a short-term aberration or a new long-
run trend?
Production with
One Variable Input (Labor)
41. Chapter 6 Slide
Production with
Two Variable Inputs
There is a relationship between
production and productivity.
Long-run production K& L are variable.
Isoquants analyze and compare the
different combinations of K & L and
output
42. Chapter 6 Slide
The Shape of Isoquants
Labor per year
1
2
3
4
1 2 3 4 5
5
In the long run both
labor and capital are
variable and both
experience diminishing
returns.
Q1 = 55
Q2 = 75
Q3 = 90
Capital
per year
A
D
B C
E
43. Chapter 6 Slide
Reading the Isoquant Model
1) Assume capital is 3 and labor
increases from 0 to 1 to 2 to 3.
Notice output increases at a decreasing
rate (55, 20, 15) illustrating diminishing
returns from labor in the short-run and
long-run.
Production with
Two Variable Inputs
Diminishing Marginal Rate of SubstitutionDiminishing Marginal Rate of Substitution
44. Chapter 6 Slide
Reading the Isoquant Model
2) Assume labor is 3 and capital
increases from 0 to 1 to 2 to 3.
Output also increases at a decreasing
rate (55, 20, 15) due to diminishing
returns from capital.
Diminishing Marginal Rate of SubstitutionDiminishing Marginal Rate of Substitution
Production with
Two Variable Inputs
45. Chapter 6 Slide
Substituting Among Inputs
Managers want to determine what
combination if inputs to use.
They must deal with the trade-off between
inputs.
Production with
Two Variable Inputs
46. Chapter 6 Slide
Substituting Among Inputs
The slope of each isoquant gives the trade-
off between two inputs while keeping
output constant.
Production with
Two Variable Inputs
47. Chapter 6 Slide
Substituting Among Inputs
The marginal rate of technical substitution
equals:
inputlaborinangecapital/ChinChange-MRTS =
)oflevelfixeda(for Q
L
KMRTS
∆
∆−=
Production with
Two Variable Inputs
48. Chapter 6 Slide
Marginal Rate of
Technical Substitution
Labor per month
1
2
3
4
1 2 3 4 5
5Capital
per year
Isoquants are downward
sloping and convex
like indifference
curves.
1
1
1
1
2
1
2/3
1/3
Q1 =55
Q2 =75
Q3 =90
49. Chapter 6 Slide
Observations:
1) Increasing labor in one unit
increments from 1 to 5 results in a
decreasing MRTS from 1 to 1/2.
2) Diminishing MRTS occurs because
of diminishing returns and implies
isoquants are convex.
Production with
Two Variable Inputs
50. Chapter 6 Slide
Observations:
3) MRTS and Marginal Productivity
The change in output from a change in
labor equals:
L))((MPL ∆
Production with
Two Variable Inputs
51. Chapter 6 Slide
Observations:
3) MRTS and Marginal Productivity
The change in output from a change in
capital equals:
Production with
Two Variable Inputs
K))((MPK ∆
52. Chapter 6 Slide
Observations:
3) MRTS and Marginal Productivity
If output is constant and labor is
increased, then:
0K))((MPL))((MP KL =∆+∆
MRTSL)K/(-))(MP(MP KL =∆∆=
Production with
Two Variable Inputs
53. Chapter 6 Slide
Isoquants When Inputs are
Perfectly Substitutable
Labor
per month
Capital
per
month
Q1 Q2 Q3
A
B
C
54. Chapter 6 Slide
Observations when inputs are perfectly
substitutable:
1) The MRTS is constant at all points on
the isoquant.
Production with
Two Variable Inputs
Perfect SubstitutesPerfect Substitutes
55. Chapter 6 Slide
Observations when inputs are perfectly
substitutable:
2) For a given output, any combination
of inputs can be chosen (A, B, or C) to
generate the same level of output
(e.g. toll booths & musical
instruments)
Production with
Two Variable Inputs
Perfect SubstitutesPerfect Substitutes
57. Chapter 6 Slide
Observations when inputs must be in a
fixed-proportion:
1) No substitution is possible.Each
output requires a specific amount of
each input (e.g. labor and
jackhammers).
Fixed-Proportions Production FunctionFixed-Proportions Production Function
Production with
Two Variable Inputs
58. Chapter 6 Slide
Observations when inputs must be in a
fixed-proportion:
2) To increase output requires more
labor and capital (i.e. moving from
A to B to C which is technically
efficient).
Fixed-Proportions Production FunctionFixed-Proportions Production Function
Production with
Two Variable Inputs
59. Chapter 6 Slide
A Production Function for Wheat
Farmers must choose between a capital
intensive or labor intensive technique of
production.
60. Chapter 6 Slide
Isoquant Describing the
Production of Wheat
Labor
(hours per year)
Capital
(machine
hour per
year)
250 500 760 1000
40
80
120
100
90
Output = 13,800 bushels
per year
A
B
10-K =∆
260L =∆
Point A is more
capital-intensive, and
B is more labor-intensive.
61. Chapter 6 Slide
Observations:
1) Operating at A:
L = 500 hours and K = 100
machine hours.
Isoquant Describing the
Production of Wheat
62. Chapter 6 Slide
Observations:
2) Operating at B
Increase L to 760 and decrease K to 90
the MRTS < 1:
04.0)260/10( =−=
∆
∆=
L
K-MRTS
Isoquant Describing the
Production of Wheat
63. Chapter 6 Slide
Observations:
3) MRTS < 1, therefore the cost of labor
must be less than capital in order for
the farmer substitute labor for capital.
4) If labor is expensive, the farmer would
use more capital (e.g. U.S.).
Isoquant Describing the
Production of Wheat
64. Chapter 6 Slide
Observations:
5) If labor is inexpensive, the farmer
would use more labor (e.g. India).
Isoquant Describing the
Production of Wheat
65. Chapter 6 Slide
Returns to Scale
Measuring the relationship between the
scale (size) of a firm and output
1) Increasing returns to scale: output
more than doubles when all inputs
are doubled
Larger output associated with lower cost (autos)
One firm is more efficient than many (utilities)
The isoquants get closer together
66. Chapter 6 Slide
Returns to Scale
Labor (hours)
Capital
(machine
hours)
10
20
30
Increasing Returns:
The isoquants move closer together
5 10
2
4
0
A
67. Chapter 6 Slide
Returns to Scale
Measuring the relationship between the
scale (size) of a firm and output
2) Constant returns to scale: output
doubles when all inputs are doubled
Size does not affect productivity
May have a large number of producers
Isoquants are equidistant apart
68. Chapter 6 Slide
Returns to Scale
Labor (hours)
Capital
(machine
hours)
Constant Returns:
Isoquants are
equally
spaced
10
20
30
155 10
2
4
0
A
6
69. Chapter 6 Slide
Returns to Scale
Measuring the relationship between the
scale (size) of a firm and output
3) Decreasing returns to scale: output
less than doubles when all inputs
are doubled
Decreasing efficiency with large size
Reduction of entrepreneurial abilities
Isoquants become farther apart
70. Chapter 6 Slide
Returns to Scale
Labor (hours)
Capital
(machine
hours)
Decreasing Returns:
Isoquants get further
apart
10
20
30
5 10
2
4
0
A
71. Chapter 6 Slide
Returns to Scale
in the Carpet Industry
The carpet industry has grown from a
small industry to a large industry with
some very large firms.
72. Chapter 6 Slide
Returns to Scale
in the Carpet Industry
Question
Can the growth be explained by the
presence of economies to scale?
73. Carpet Shipments, 1996
(Millions of Dollars per Year)
The U.S. Carpet Industry
1. Shaw Industries $3,202 6. World Carpets $475
2. Mohawk Industries 1,795 7. Burlington Industries 450
3. Beaulieu of America 1,006 8. Collins & Aikman 418
4. Interface Flooring 820 9. Masland Industries 380
5. Queen Carpet 775 10. Dixied Yarns 280
74. Chapter 6 Slide
Returns to Scale
in the Carpet Industry
Are there economies of scale?
Costs (percent of cost)
Capital -- 77%
Labor -- 23%
75. Chapter 6 Slide
Returns to Scale
in the Carpet Industry
Large Manufacturers
Increased in machinery & labor
Doubling inputs has more than doubled
output
Economies of scale exist for large
producers
76. Chapter 6 Slide
Returns to Scale
in the Carpet Industry
Small Manufacturers
Small increases in scale have little or no
impact on output
Proportional increases in inputs increase
output proportionally
Constant returns to scale for small
producers
77. Chapter 6 Slide
Summary
A production function describes the
maximum output a firm can produce for
each specified combination of inputs.
An isoquant is a curve that shows all
combinations of inputs that yield a given
level of output.
78. Chapter 6 Slide
Summary
Average product of labor measures the
productivity of the average worker,
whereas marginal product of labor
measures the productivity of the last
worker added.
79. Chapter 6 Slide
Summary
The law of diminishing returns explains
that the marginal product of an input
eventually diminishes as its quantity is
increased.
80. Chapter 6 Slide
Summary
Isoquants always slope downward
because the marginal product of all
inputs is positive.
The standard of living that a country can
attain for its citizens is closely related to
its level of productivity.
81. Chapter 6 Slide
Summary
In long-run analysis, we tend to focus
on the firm’s choice of its scale or size
of operation.