微观经济学及财务知识分析规范课件

TopicstobeDiscussedTheTechnologyofProductionIsoquantsProductionwithOneVariableInput(Labor)ProductionwithTwoVariableInputsReturnstoScale1Chapter6TopicstobeDiscussedTheTechIntroductionOurfocusisthesupplyside.Thetheoryofthefirmwilladdress:Howafirmmakescost-minimizingproductiondecisionsHowcostvarieswithoutputCharacteristicsofmarketsupplyIssuesofbusinessregulation2Chapter6IntroductionOurfocusisthesTheTechnologyofProductionTheProductionProcessCombininginputsorfactorsofproductiontoachieveanoutputCategoriesofInputs(factorsofproduction)LaborMaterialsCapital3Chapter6TheTechnologyofProductionThTheTechnologyofProductionProductionFunction:Indicatesthehighestoutputthatafirmcanproduceforeveryspecifiedcombinationofinputsgiventhestateoftechnology.Showswhatistechnicallyfeasiblewhenthefirmoperatesefficiently.4Chapter6TheTechnologyofProductionPrTheTechnologyofProductionTheproductionfunctionfortwoinputs:

Q=F(K,L)Q=Output,K=Capital,L=LaborForagiventechnology5Chapter6TheTechnologyofProductionThIsoquantsAssumptionsFoodproducerhastwoinputsLabor(L)&Capital(K)6Chapter6IsoquantsAssumptions6Chapter6IsoquantsObservations: 1) ForanylevelofK,outputincreases with moreL. 2) ForanylevelofL,outputincreases with moreK. 3) Variouscombinationsofinputs producethesameoutput.7Chapter6IsoquantsObservations:7ChapterIsoquantsIsoquantsCurvesshowingallpossiblecombinationsofinputsthatyieldthesameoutput8Chapter6IsoquantsIsoquants8Chapter6ProductionFunctionforFood1 20 40 55 65 752 40 60 75 85 903 55 75 90 100 1054 65 85 100 110 1155 75 90 105 115 120CapitalInput 1 2 3 4 5LaborInput9Chapter6ProductionFunctionforFood1 ProductionwithTwoVariableInputs(L,K)Laborperyear1234123455Q1=55Theisoquantsarederivedfromtheproductionfunctionforoutputofof55,75,and90.ADBQ2=75Q3=90CECapitalperyearTheIsoquantMap10Chapter6ProductionwithTwoVariableIIsoquantsTheisoquantsemphasizehowdifferentinputcombinationscanbeusedtoproducethesameoutput.Thisinformationallowstheproducertorespondefficientlytochangesinthemarketsforinputs.InputFlexibility11Chapter6IsoquantsTheisoquantsemphasiIsoquantsShort-run:Periodoftimeinwhichquantitiesofoneormoreproductionfactorscannotbechanged.Theseinputsarecalledfixedinputs.TheShortRunversustheLongRun12Chapter6IsoquantsShort-run:TheShortRIsoquantsLong-runAmountoftimeneededtomakeallproductioninputsvariable.TheShortRunversustheLongRun13Chapter6IsoquantsLong-runTheShortRun Amount Amount Total Average Marginal ofLabor(L) ofCapital(K) Output(Q) Product ProductProductionwith

OneVariableInput(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 -814Chapter6 Amount Amount Total Average Observations: 1) Withadditionalworkers,output(Q) increases,reachesamaximum,and then decreases.Productionwith

OneVariableInput(Labor)15Chapter6Observations:Productionwith

OObservations: 2) Theaverageproductoflabor(AP), oroutputperworker,increasesand then decreases.Productionwith

OneVariableInput(Labor)16Chapter6Observations:Productionwith

OObservations: 3) Themarginalproductoflabor(MP), oroutputoftheadditionalworker, increasesrapidlyinitiallyandthen decreasesandbecomesnegative..Productionwith

OneVariableInput(Labor)17Chapter6Observations:Productionwith

OTotalProductA:slopeoftangent=MP(20)B:slopeofOB=AP(20)C:slopeofOC=MP&APLaborperMonthOutputperMonth60112023456789101ABCDProductionwith

OneVariableInput(Labor)18Chapter6TotalProductA:slopeoftangeAverageProductProductionwith

OneVariableInput(Labor)81020OutputperMonth02345679101LaborperMonth30EMarginalProductObservations:LeftofE:MP>AP&APisincreasingRightofE:MP<AP&APisdecreasingE:MP=AP&APisatitsmaximum19Chapter6AverageProductProductionwithObservations:WhenMP=0,TPisatitsmaximumWhenMP>AP,APisincreasingWhenMP<AP,APisdecreasingWhenMP=AP,APisatitsmaximumProductionwith

OneVariableInput(Labor)20Chapter6Observations:Productionwith

OProductionwith

OneVariableInput(Labor)LaborperMonthOutputperMonth60112023456789101ABCD81020E0234567910130OutputperMonthLaborperMonthAP=slopeoflinefromorigintoapointonTP,linesb,&c.MP=slopeofatangenttoanypointontheTPline,linesa&c.Productionwith

OneVariableI21Astheuseofaninputincreasesinequalincrements,apointwillbereachedatwhichtheresultingadditionstooutputdecreases(i.e.MPdeclines).Productionwith

OneVariableInput(Labor)TheLawofDiminishingMarginalReturns22Chapter6AstheuseofaninputincreasWhenthelaborinputissmall,MPincreasesduetospecialization.Whenthelaborinputislarge,MPdecreasesduetoinefficiencies.TheLawofDiminishingMarginalReturnsProductionwith

OneVariableInput(Labor)23Chapter6Whenthelaborinputissmall,Canbeusedforlong-rundecisionstoevaluatethetrade-offsofdifferentplantconfigurationsAssumesthequalityofthevariableinputisconstantTheLawofDiminishingMarginalReturnsProductionwith

OneVariableInput(Labor)24Chapter6Canbeusedforlong-rundecisExplainsadecliningMP,notnecessarilyanegativeoneAssumesaconstanttechnologyTheLawofDiminishingMarginalReturnsProductionwith

OneVariableInput(Labor)25Chapter6ExplainsadecliningMP,notnTheEffectof

TechnologicalImprovementLaborpertimeperiodOutputpertimeperiod50100023456789101AO1CO3O2BLaborproductivitycanincreaseifthereareimprovementsintechnology,eventhoughanygivenproductionprocessexhibitsdiminishingreturnstolabor.26Chapter6TheEffectof

TechnologicalImMalthuspredictedmasshungerandstarvationasdiminishingreturnslimitedagriculturaloutputandthepopulationcontinuedtogrow.WhydidMalthus’predictionfail?MalthusandtheFoodCrisis27Chapter6MalthuspredictedmasshungerIndexofWorldFood

ConsumptionPerCapita 1948-1952 100 1960 115 1970 123 1980 128 1990 137 1995 135 1998 140Year Index28Chapter6IndexofWorldFood

ConsumptioMalthusandtheFoodCrisisThedatashowthatproductionincreaseshaveexceededpopulationgrowth.Malthusdidnottakeintoconsiderationthepotentialimpactoftechnologywhichhasallowedthesupplyoffoodtogrowfasterthandemand.29Chapter6MalthusandtheFoodCrisisTheMalthusandtheFoodCrisisTechnologyhascreatedsurplusesanddriventhepricedown.QuestionIffoodsurplusesexist,whyistherehunger?30Chapter6MalthusandtheFoodCrisisTecMalthusandtheFoodCrisisAnswerThecostofdistributingfoodfromproductiveregionstounproductiveregionsandthelowincomelevelsofthenon-productiveregions.31Chapter6MalthusandtheFoodCrisisAnsLaborProductivityProductionwith

OneVariableInput(Labor)32Chapter6LaborProductivityProductionLaborProductivityandtheStandardofLivingConsumptioncanincreaseonlyifproductivityincreases.DeterminantsofProductivityStockofcapitalTechnologicalchangeProductionwith

OneVariableInput(Labor)33Chapter6LaborProductivityandtheStaLaborProductivityin

DevelopedCountries1960-1973 4.75 4.04 8.30 2.89 2.361974-1986 2.10 1.85 2.50 1.69 0.711987-1997 1.48 2.00 1.94 1.02 1.09

United United France Germany Japan Kingdom StatesAnnualRateofGrowthofLaborProductivity(%) $54,507 $55,644 $46,048 $42,630 $60,915OutputperEmployedPerson(1997)34Chapter6LaborProductivityin

DevelopeTrendsinProductivity 1) U.S.productivityisgrowingata slowerratethanothercountries. 2) Productivitygrowthindeveloped countrieshasbeendecreasing.Productionwith

OneVariableInput(Labor)35Chapter6TrendsinProductivityProductiExplanationsforProductivityGrowthSlowdown 1) Growthinthestockofcapitalisthe primarydeterminantofthegrowthin productivity.Productionwith

OneVariableInput(Labor)36Chapter6ExplanationsforProductivityExplanationsforProductivityGrowthSlowdown 2) Rateofcapitalaccumulationinthe U.S. wasslowerthanother developedcountriesbecausethe otherswererebuildingafterWWII.Productionwith

OneVariableInput(Labor)37Chapter6ExplanationsforProductivityExplanationsforProductivityGrowthSlowdown 3) Depletionofnaturalresources 4)EnvironmentregulationsProductionwith

OneVariableInput(Labor)38Chapter6ExplanationsforProductivityObservationU.S.productivityhasincreasedinrecentyearsWhatDoYouThink?Isitashort-termaberrationoranewlong-runtrend?Productionwith

OneVariableInput(Labor)39Chapter6ObservationProductionwith

OneProductionwith

TwoVariableInputsThereisarelationshipbetweenproductionandproductivity.Long-runproductionK&Larevariable.IsoquantsanalyzeandcomparethedifferentcombinationsofK&Landoutput40Chapter6Productionwith

TwoVariableITheShapeofIsoquantsLaborperyear1234123455Inthelongrunbothlaborandcapitalarevariableandbothexperiencediminishingreturns.Q1=55Q2=75Q3=90CapitalperyearADBCE41Chapter6TheShapeofIsoquantsLaborpeReadingtheIsoquantModel 1) Assumecapitalis3andlabor increasesfrom0to1to2to3.Noticeoutputincreasesatadecreasingrate(55,20,15)illustratingdiminishingreturnsfromlaborintheshort-runandlong-run.Productionwith

TwoVariableInputsDiminishingMarginalRateofSubstitution42Chapter6ReadingtheIsoquantModelProdReadingtheIsoquantModel 2) Assumelaboris3andcapital increasesfrom0to1to2to3.Outputalsoincreasesatadecreasingrate(55,20,15)duetodiminishingreturnsfromcapital.DiminishingMarginalRateofSubstitutionProductionwith

TwoVariableInputs43Chapter6ReadingtheIsoquantModelDimiSubstitutingAmongInputsManagerswanttodeterminewhatcombinationifinputstouse.Theymustdealwiththetrade-offbetweeninputs.Productionwith

TwoVariableInputs44Chapter6SubstitutingAmongInputsProduSubstitutingAmongInputsTheslopeofeachisoquantgivesthetrade-offbetweentwoinputswhilekeepingoutputconstant.Productionwith

TwoVariableInputs45Chapter6SubstitutingAmongInputsProduSubstitutingAmongInputsThemarginalrateoftechnicalsubstitutionequals:Productionwith

TwoVariableInputs46Chapter6SubstitutingAmongInputsProduMarginalRateof

TechnicalSubstitutionLaborpermonth1234123455CapitalperyearIsoquantsaredownwardslopingandconvexlikeindifferencecurves.1111212/31/3Q1=55Q2=75Q3=9047Chapter6MarginalRateof

TechnicalSubObservations: 1) Increasinglaborinoneunit incrementsfrom1to5resultsina decreasingMRTSfrom1to1/2. 2) DiminishingMRTSoccursbecause ofdiminishingreturnsandimplies isoquantsareconvex.Productionwith

TwoVariableInputs48Chapter6Observations:Productionwith

TObservations: 3) MRTSandMarginalProductivityThechangeinoutputfromachangeinlaborequals:Productionwith

TwoVariableInputs49Chapter6Observations:Productionwith

TObservations: 3) MRTSandMarginalProductivityThechangeinoutputfromachangeincapitalequals:Productionwith

TwoVariableInputs50Chapter6Observations:Productionwith

TObservations: 3) MRTSandMarginalProductivityIfoutputisconstantandlaborisincreased,then:Productionwith

TwoVariableInputs51Chapter6Observations:Productionwith

TIsoquantsWhenInputsarePerfectlySubstitutableLaborpermonthCapitalpermonthQ1Q2Q3ABC52Chapter6IsoquantsWhenInputsarePerfObservationswheninputsareperfectlysubstitutable: 1) TheMRTSisconstantatallpointson theisoquant.Productionwith

TwoVariableInputsPerfectSubstitutes53Chapter6ObservationswheninputsarepObservationswheninputsareperfectlysubstitutable: 2) Foragivenoutput,anycombinationof inputscanbechosen(A,B,orC)to generatethesamelevelofoutput (e.g.tollbooths&musical instruments)Productionwith

TwoVariableInputsPerfectSubstitutes54Chapter6ObservationswheninputsarepFixed-Proportions

ProductionFunctionLaborpermonthCapitalpermonthL1K1Q1Q2Q3ABC55Chapter6Fixed-Proportions

ProductionFObservationswheninputsmustbeinafixed-proportion: 1) Nosubstitutionispossible.Each outputrequiresaspecificamountof eachinput(e.g.laborand jackhammers).Fixed-ProportionsProductionFunctionProductionwith

TwoVariableInputs56Chapter6ObservationswheninputsmustObservationswheninputsmustbeinafixed-proportion: 2) Toincreaseoutputrequiresmore laborandcapital(i.e.movingfromA toBtoCwhichistechnically efficient).Fixed-ProportionsProductionFunctionProductionwith

TwoVariableInputs57Chapter6ObservationswheninputsmustAProductionFunctionforWheatFarmersmustchoosebetweenacapitalintensiveorlaborintensivetechniqueofproduction.58Chapter6AProductionFunctionforWheaIsoquantDescribingthe

ProductionofWheatLabor(hoursperyear)Capital(machinehourperyear)2505007601000408012010090Output=13,800bushels peryearABPointAismorecapital-intensive,andBismorelabor-intensive.59Chapter6IsoquantDescribingthe

ProducObservations: 1) OperatingatA:L=500hoursandK=100machinehours. IsoquantDescribingthe

ProductionofWheat60Chapter6Observations:IsoquantDescribiObservations: 2) OperatingatBIncreaseLto760anddecreaseKto90theMRTS<1:IsoquantDescribingthe

ProductionofWheat61Chapter6Observations:IsoquantDescribiObservations: 3) MRTS<1,thereforethecostoflabor mustbelessthancapitalinorderfor thefarmersubstitutelaborforcapital. 4) Iflaborisexpensive,thefarmerwould usemorecapital(e.g.U.S.).IsoquantDescribingthe

ProductionofWheat62Chapter6Observations:IsoquantDescribiObservations: 5) Iflaborisinexpensive,thefarmer wouldusemorelabor(e.g.India).IsoquantDescribingthe

ProductionofWheat63Chapter6Observations:IsoquantDescribiReturnstoScaleMeasuringtherelationshipbetweenthescale(size)ofafirmandoutput 1) Increasingreturnstoscale:output morethandoubleswhenallinputs aredoubledLargeroutputassociatedwithlowercost(autos)Onefirmismoreefficientthanmany(utilities)Theisoquantsgetclosertogether64Chapter6ReturnstoScaleMeasuringtheReturnstoScaleLabor(hours)Capital(machinehours)102030IncreasingReturns:Theisoquantsmoveclosertogether510240A65Chapter6ReturnstoScaleLabor(hours)CReturnstoScaleMeasuringtherelationshipbetweenthescale(size)ofafirmandoutput 2) Constantreturnstoscale:output doubleswhenallinputsaredoubledSizedoesnotaffectproductivityMayhavealargenumberofproducersIsoquantsareequidistantapart66Chapter6ReturnstoScaleMeasuringtheReturnstoScaleLabor(hours)Capital(machinehours)ConstantReturns:Isoquantsareequallyspaced10203015510240A667Chapter6ReturnstoScaleLabor(hours)CReturnstoScaleMeasuringtherelationshipbetweenthescale(size)ofafirmandoutput 3) Decreasingreturnstoscale:output lessthandoubleswhenallinputsare doubledDecreasingefficiencywithlargesizeReductionofentrepreneurialabilitiesIsoquantsbecomefartherapart68Chapter6ReturnstoScaleMeasuringtheReturnstoScaleLabor(hours)Capital(machinehours)DecreasingReturns:Isoquantsgetfurtherapart102030510240A69Chapter6ReturnstoScaleLabor(hours)CReturnstoScale

intheCarpetIndustryThecarpetindustryhasgrownfromasmallindustrytoalargeindustrywithsomeverylargefirms.70Chapter6ReturnstoScale

intheCarpetReturnstoScale

intheCarpetIndustryQuestionCanthegrowthbeexplainedbythepresenceofeconomiestoscale?71Chapter6ReturnstoScale

intheCarpetCarpetShipments,1996(MillionsofDollarsperYear)TheU.S.CarpetIndustry1.ShawIndustries $3,202 6.WorldCarpets $4752.MohawkIndustries 1,795 7.BurlingtonIndustries 4503.BeaulieuofAmerica 1,006 8.Collins&Aikman 4184.InterfaceFlooring 820 9.MaslandIndustries 3805.QueenCarpet 775 10.DixiedYarns 280CarpetShipments,1996TheU.S.72ReturnstoScale

intheCarpetIndustryArethereeconomiesofscale?Costs(percentofcost)Capital--77%Labor--23%73Chapter6ReturnstoScale

intheCarpetReturnstoScale

intheCarpetIndustryLargeManufacturersIncreasedinmachinery&laborDoublinginputshasmorethandoubledoutputEconomiesofscaleexistforlargeproducers74Chapter6ReturnstoScale

intheCarpetReturnstoScale

intheCarpetIndustrySmallManufacturersSmallincreasesinscalehavelittleornoimpactonoutputProportionalincreasesininputsincreaseoutputproportionallyConstantreturnstoscaleforsmallproducers75Chapter6ReturnstoScale

intheCarpetSummaryAproductionfunctiondescribesthemaximumoutputafirmcanproduceforeachspecifiedcombinationofinputs.Anisoquantisacurvethatshowsallcombinationsofinputsthatyieldagivenlevelofoutput.76Chapter6SummaryAproductionfunctiondSummaryAverageproductoflabormeasurestheproductivityoftheaverageworker,whereasmarginalproductoflabormeasurestheproductivityofthelastworkeradded.77Chapter6SummaryAverageproductoflaboSummaryThelawofdiminishingreturnsexplainsthatthemarginalproductofaninputeventuallydiminishesasitsquantityisincreased.78Chapter6SummaryThelawofdiminishingSummaryIsoquantsalwaysslopedownwardbecausethemarginalproductofallinputsispositive.Thestandardoflivingthatacountrycanattainforitscitizensiscloselyrelatedtoitslevelofproductivity.79Chapter6SummaryIsoquantsalwaysslopeSummaryInlong-runanalysis,wetendtofocusonthefirm’schoiceofitsscaleorsizeofoperation.80Chapter6SummaryInlong-runanalysis,wEndofChapter6ProductionEndofChapter6Production81TopicstobeDiscussedTheTechnologyofProductionIsoquantsProductionwithOneVariableInput(Labor)ProductionwithTwoVariableInputsReturnstoScale82Chapter6TopicstobeDiscussedTheTechIntroductionOurfocusisthesupplyside.Thetheoryofthefirmwilladdress:Howafirmmakescost-minimizingproductiondecisionsHowcostvarieswithoutputCharacteristicsofmarketsupplyIssuesofbusinessregulation83Chapter6IntroductionOurfocusisthesTheTechnologyofProductionTheProductionProcessCombininginputsorfactorsofproductiontoachieveanoutputCategoriesofInputs(factorsofproduction)LaborMaterialsCapital84Chapter6TheTechnologyofProductionThTheTechnologyofProductionProductionFunction:Indicatesthehighestoutputthatafirmcanproduceforeveryspecifiedcombinationofinputsgiventhestateoftechnology.Showswhatistechnicallyfeasiblewhenthefirmoperatesefficiently.85Chapter6TheTechnologyofProductionPrTheTechnologyofProductionTheproductionfunctionfortwoinputs:

Q=F(K,L)Q=Output,K=Capital,L=LaborForagiventechnology86Chapter6TheTechnologyofProductionThIsoquantsAssumptionsFoodproducerhastwoinputsLabor(L)&Capital(K)87Chapter6IsoquantsAssumptions6Chapter6IsoquantsObservations: 1) ForanylevelofK,outputincreases with moreL. 2) ForanylevelofL,outputincreases with moreK. 3) Variouscombinationsofinputs producethesameoutput.88Chapter6IsoquantsObservations:7ChapterIsoquantsIsoquantsCurvesshowingallpossiblecombinationsofinputsthatyieldthesameoutput89Chapter6IsoquantsIsoquants8Chapter6ProductionFunctionforFood1 20 40 55 65 752 40 60 75 85 903 55 75 90 100 1054 65 85 100 110 1155 75 90 105 115 120CapitalInput 1 2 3 4 5LaborInput90Chapter6ProductionFunctionforFood1 ProductionwithTwoVariableInputs(L,K)Laborperyear1234123455Q1=55Theisoquantsarederivedfromtheproductionfunctionforoutputofof55,75,and90.ADBQ2=75Q3=90CECapitalperyearTheIsoquantMap91Chapter6ProductionwithTwoVariableIIsoquantsTheisoquantsemphasizehowdifferentinputcombinationscanbeusedtoproducethesameoutput.Thisinformationallowstheproducertorespondefficientlytochangesinthemarketsforinputs.InputFlexibility92Chapter6IsoquantsTheisoquantsemphasiIsoquantsShort-run:Periodoftimeinwhichquantitiesofoneormoreproductionfactorscannotbechanged.Theseinputsarecalledfixedinputs.TheShortRunversustheLongRun93Chapter6IsoquantsShort-run:TheShortRIsoquantsLong-runAmountoftimeneededtomakeallproductioninputsvariable.TheShortRunversustheLongRun94Chapter6IsoquantsLong-runTheShortRun Amount Amount Total Average Marginal ofLabor(L) ofCapital(K) Output(Q) Product ProductProductionwith

OneVariableInput(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 -895Chapter6 Amount Amount Total Average Observations: 1) Withadditionalworkers,output(Q) increases,reachesamaximum,and then decreases.Productionwith

OneVariableInput(Labor)96Chapter6Observations:Productionwith

OObservations: 2) Theaverageproductoflabor(AP), oroutputperworker,increasesand then decreases.Productionwith

OneVariableInput(Labor)97Chapter6Observations:Productionwith

OObservations: 3) Themarginalproductoflabor(MP), oroutputoftheadditionalworker, increasesrapidlyinitiallyandthen decreasesandbecomesnegative..Productionwith

OneVariableInput(Labor)98Chapter6Observations:Productionwith

OTotalProductA:slopeoftangent=MP(20)B:slopeofOB=AP(20)C:slopeofOC=MP&APLaborperMonthOutputperMonth60112023456789101ABCDProductionwith

OneVariableInput(Labor)99Chapter6TotalProductA:slopeoftangeAverageProductProductionwith

OneVariableInput(Labor)81020OutputperMonth02345679101LaborperMonth30EMarginalProductObservations:LeftofE:MP>AP&APisincreasingRightofE:MP<AP&APisdecreasingE:MP=AP&APisatitsmaximum100Chapter6AverageProductProductionwithObservations:WhenMP=0,TPisatitsmaximumWhenMP>AP,APisincreasingWhenMP<AP,APisdecreasingWhenMP=AP,APisatitsmaximumProductionwith

OneVariableInput(Labor)101Chapter6Observations:Productionwith

OProductionwith

OneVariableInput(Labor)LaborperMonthOutputperMonth60112023456789101ABCD81020E0234567910130OutputperMonthLaborperMonthAP=slopeoflinefromorigintoapointonTP,linesb,&c.MP=slopeofatangenttoanypointontheTPline,linesa&c.Productionwith

OneVariableI102Astheuseofaninputincreasesinequalincrements,apointwillbereachedatwhichtheresultingadditionstooutputdecreases(i.e.MPdeclines).Productionwith

OneVariableInput(Labor)TheLawofDiminishingMarginalReturns103Chapter6AstheuseofaninputincreasWhenthelaborinputissmall,MPincreasesduetospecialization.Whenthelaborinputislarge,MPdecreasesduetoinefficiencies.TheLawofDiminishingMarginalReturnsProductionwith

OneVariableInput(Labor)104Chapter6Whenthelaborinputissmall,Canbeusedforlong-rundecisionstoevaluatethetrade-offsofdifferentplantconfigurationsAssumesthequalityofthevariableinputisconstantTheLawofDiminishingMarginalReturnsProductionwith

OneVariableInput(Labor)105Chapter6Canbeusedforlong-rundecisExplainsadecliningMP,notnecessarilyanegativeoneAssumesaconstanttechnologyTheLawofDiminishingMarginalReturnsProductionwith

OneVariableInput(Labor)106Chapter6ExplainsadecliningMP,notnTheEffectof

TechnologicalImprovementLaborpertimeperiodOutputpertimeperiod50100023456789101AO1CO3O2BLaborproductivitycanincreaseifthereareimprovementsintechnology,eventhoughanygivenproductionprocessexhibitsdiminishingreturnstolabor.107Chapter6TheEffectof

TechnologicalImMalthuspredictedmasshungerandstarvationasdiminishingreturnslimitedagriculturaloutputandthepopulationcontinuedtogrow.WhydidMalthus’predictionfail?MalthusandtheFoodCrisis108Chapter6MalthuspredictedmasshungerIndexofWorldFood

ConsumptionPerCapita 1948-1952 100 1960 115 1970 123 1980 128 1990 137 1995 135 1998 140Year Index109Chapter6IndexofWorldFood

ConsumptioMalthusandtheFoodCrisisThedatashowthatproductionincreaseshaveexceededpopulationgrowth.Malthusdidnottakeintoconsiderationthepotentialimpactoftechnologywhichhasallowedthesupplyoffoodtogrowfasterthandemand.110Chapter6MalthusandtheFoodCrisisTheMalthusandtheFoodCrisisTechnologyhascreatedsurplusesanddriventhepricedown.QuestionIffoodsurplusesexist,whyistherehunger?111Chapter6MalthusandtheFoodCrisisTecMalthusandtheFoodCrisisAnswerThecostofdistributingfoodfromproductiveregionstounproductiveregionsandthelowincomelevelsofthenon-productiveregions.112Chapter6MalthusandtheFoodCrisisAnsLaborProductivityProductionwith

OneVariableInput(Labor)113Chapter6LaborProductivityProductionLaborProductivityandtheStandardofLivingConsumptioncanincreaseonlyifproductivityincreases.DeterminantsofProductivityStockofcapitalTechnologicalchangeProductionwith

OneVariableInput(Labor)114Chapter6LaborProductivityandtheStaLaborProductivityin

DevelopedCountries1960-1973 4.75 4.04 8.30 2.89 2.361974-1986 2.10 1.85 2.