ECO206_Fall10-11_Lec.11

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School
Department
Course
Lecture 11 t November 24, 2010
Production Function:
Describes tech. relationship b/w inputs & outputs
q = F (K, L, M) [K L M being Capital Labour and intermediate]
Variable/ Fixed inputs
Suppose q = (K, L), q
Interested in !ä
!Å
 !¿
!ÅL/2L MPL
One-input Production:
q = 6L2 t 1/3 L3 MPL L
!ä
!ÅL/2. Lst.F.6 APL
!ÆÉÅ
!ÅLst Ft.LÎ
L = 6 9 12 L
APL = q/L = 6L2 -13L3 = 6L t 1/3L2
!ºÉÅ
!ÅLxF6
7LÎ L = 9
!.ºÉÅ
!.ÅLF6
7Or
!ºÉÅ
!ÅL!@Ü
½A
!ÅL!ä
!ÅÛ5
ÅFMÛ5
Å.L
Ü
½?Ü
½
ÅLÆÉÅ?ºÉÅ
Å
Elasticity of output with respect to labour
Elasticity of output with respect to capital
Q = F(K,L)
1 = WL = ¨¿ä
¨¿ÅL
¿Ü
Ü
¿½
½
L
¿Ü
¿½
Ü
½
LÆÉÅ
ºÉÅ
MPL > APL => WL > 1
MPL < APL => WL < 1
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