AGEC 2003 : Test 2 Notes
Document Summary
Production: any activity or process that satisfies a human desire directly or indirectly, presently or in the future: process where resources are transformed into products or services (yields utility, examples: producing corn or cars, eating. Characteristics above indicate that output results from the particular set of resources used in some functional way. This is called production function/tpp and is represented like so: y = f(x1, x2, x3, xn, inputs are x; product is y. X1: marginal value product (mvp): amount added to tvp when another unit of variable input is used, mvp= change in tvp = mpp(price) Change in x1: marginal factor cost (mfc): amount added to total cost when an additional unit of variable input is used, mfcx1 = px1. If you add more, profit will decrease: an input demand function shows the amounts of inputs that are used by a firm at different price levels, the input demand function is the mvp in stage ii.
