Ch18Tenology.ppt

Chapter Eighteen
Technology
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Where Are We in the Course?
We have studied consumer behavior;
We now study producer behavior;
We will bine these two to study market equilibrium.
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Three Steps to Study of Producer Behavior
1st: We work on producer’s “budget set”, which is the technology set;
2nd: We study producer’s “utility function”, which is his profit function;
3rd: We examine producer’s choice, which is his optimal production plan.
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Technologies
A technology is a process by which inputs are converted to an output.
Usually several technologies will produce the same product.
How do pare technologies?
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Production Functions
Let y denote the output level.
An input bundle is a vector(向量) of the input levels; (x1, x2, …, xn).
The technology’s production function states the maximum amount of output possible from an input bundle.
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Production Functions
y = f(x) is the
production
function.
x’
x
Input Level
Output Level
y’
y’= f(x’) is the maximal output level obtainable from x’ input units.
One input, one output
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Technology Sets
A production plan is an input bundle and an output level; (x1, …, xn, y).
A production plan is feasible if
The collection of all feasible production plans is the technology set.
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Technology Sets
y = f(x) is the
production
function.
x’
x
Input Level
Output Level
y’
y”
y’= f(x’) is the maximal output level obtainable from x’ input units.
One input, one output
y”= f(x’) is an output level that is feasible from x’ input units.
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Technology Sets
The technology set is
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Technology Sets
x’
x
Input Level
Output Level
y’
One input, one output
y”
The technologyset
Technicallyinefficientplans
Technicallyefficient plans
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