goods of negative amount z_g<0

goods of positive amount z_g>0

input goods or factors of production

output goods or produced goods

production Set

contains all input goods and output goods

six conditions of a production set

if Z is empty, there is no production

you can realize z if a sequence of porduction vectors converge to z

there is some output for every input

there is no infinite amount of any good

no free lunch: you get z1 and z2 without putting something in

divine production: no output without input

Z-Convexity

Z-Convexity and possibility of inaction imply nonincreasing returns to scale

input and output inefficiencies

if there are input and output vectors that give more efficiency

isoquant

like an indifference curve (same utility) in preference theory

cardinality and ordinality

factor variations

partial vector variations

marg prod of i : change xi, keep all other variables constant, how does the output change

average prod of factor i: f(xi)/xi

MRTS

same as MRS for production functions

Edgeworth box

lens indicated by arrow. Shows all possible improvements. When lens becomes a point, no further improvement

Transformation curve (production possibility frontier)

if your lens becomes a point (singleton) for example (9,5) or (14,3) you have an optimum which corresponds to a point on the production curve

using the points you get the transformation curve

by how much is yB decreased when yA is increased by a bit

-> MRT:= dyB/dyA

Last changed10 months ago