Exploring the Production Function
1. Students often confuse production functions and
production-possibilities frontiers. They are different
relationships, but they are related. The following exercise
illustrates their relationship.
Suppose an economy has three units of capital and four
units of labor. It must use these resources to produce the
only two goods it uses: food and shelter. The technology
possessed in this economy is shown in the following
production functions:
Labor
|
Food
|
.
|
Shelter
|
4
|
7
|
27
|
31
|
34
|
4
|
0
|
4
|
5
|
6
|
3
|
5
|
21
|
25
|
28
|
3
|
0
|
3
|
4
|
5
|
2
|
3
|
16
|
20
|
23
|
2
|
0
|
2
|
3
|
4
|
1
|
1
|
10
|
13
|
15
|
1
|
0
|
1
|
2
|
3
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
.
|
0
|
1
|
2
|
3
|
.
|
0
|
1
|
2
|
3
|
Capital
|
Notice that if resources are fixed in amount and if they
are used to produce food, they cannot be used to produce
shelter. If, for example, two units of capital and two units
of labor are used to produce food, then only one unit of
capital and two units of labor will be available to produce
shelter.
Complete the production-possibilities table for this
economy:
The only two changes that alter a
production-possibilities frontier are changes in technology
or resources. Why?
Copyright
Robert Schenk
|