MGCR 293 Lecture Notes - Lecture 8: Marginal Revenue Productivity Theory Of Wages, Marginal Revenue, Isoquant

• School: McGill University
• Department: Management Core
• Course: MGCR 293
• Professor: Stephen Saideman

Document Summary

M an a ge r i al e. This chapter is similar to chapter 3 (in some aspects) except it applies to firms rather than individuals. A production function is a table, graph or equation showing the maximum product output obtained from any specific set of inputs. The basic production function is represented by q = f (k, l). This basically shows that output is a function of the amount of capital and the amount of labour. This is a production function and more advanced ones could be looked at that take into effect other production inputs, such as raw material, electricity, machinery, equipment, etc. This is the incremental change in output that happens with a small change in input: it estimates the efficiency of each input. In production theory we analyze the marginal products of the factors of production. Average product is also an important part of production theory.