ECON 230D1 Lecture Notes - Lecture 4: Human Services, Production Function, Isoquant

• School: McGill University
• Department: Economics
• Course: ECON 230D1
• Professor: Fabian Lange

Document Summary

Total product of labour the amount of output that can be produced by a given amount of labour (because we are referring to the short-run production). Average product of labour (cid:1827)(cid:3013)=(cid:3013: (cid:1827)(cid:3013)= (cid:1839)(cid:3013) Law of diminishing marginal returns if a firms keeps increasing an input, holding all other inputs and technology constant, eventually the firm will experience diminishing marginal returns: long-run production. In the long run both labor and capital are variable inputs. It is possible to substitute one output for the other. Isoquant: a curve that shows the efficient combinations of labor and capital that can produce a. If the two inputs are perfect substitutes, then the isoquants are parallel lines. Isoquants are downward sloping because each extra worker allows the firm to reduce capital by a smaller amount as the ratio of capital to labor falls. Substitutability of inputs and marginal products (cid:4666)(cid:1839)(cid:1838) (cid:1855) (cid:1853)(cid:1866)(cid:1859)(cid:1857) (cid:1866) (cid:1853)(cid:1854)(cid:1867)(cid:1873)(cid:1870)(cid:4667)+(cid:4666)(cid:1839)(cid:1837) (cid:1855) (cid:1853)(cid:1866)(cid:1859)(cid:1857) (cid:1866) (cid:1855)(cid:1853)(cid:1868)(cid:1872)(cid:1853)(cid:4667) (cid:1839)(cid:1844)(cid:1846)(cid:1845)= (cid:1839)(cid:3013)/(cid:1839)(cid:3012)