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 changed6 months ago
