经济学原理蔡教学（洪滨）Chapter6.pptVIP

Reminder: Review Chapter 6 Preview Chapter 7 Homework 2 due on October 12 in class. Thank you! * * * * * 经济学原理：第六讲 蔡洪滨 9/26/2011 北京大学光华管理学院 Ch. 6: Production and Business Organization Theory of Production and Marginal Product Business Organization 6A. Theory of Production What is behind the supply curve? behavior of producers----theory of production Production: the process of transforming inputs (labor, capital and land) into outputs (food, clothing, books, ….) Inputs----technology---outputs Recall PPF (production possibility frontier): different output combinations that can be produced given technology and inputs. 6A. Production Function Focus on one particular output: how much can be produced given a certain quantity of inputs? Production function: the maximum output that can be produced given a certain quantity of inputs. A particular production function describes a particular technology of transforming inputs into outputs. For example, , where is the output (e.g., rice) and is labor, and is capital. The function is the production function linking inputs to outputs. Total, Average, and Marginal Products Often we want to know how output changes as one input changes. In answering this question, we need to hold other inputs constant. Total output: , the total amount of output can be produced for a quantity of labor (holding capital fixed). Marginal output: , the additional amount of output resulting from one additional unit of labor. Average output: , total output divided by total input The Law of Diminishing Returns The law of diminishing returns states that as one input increases (holding other inputs constant), its marginal output decreases. The key here is that other inputs are held constant. The law holds as a general principle, not necessarily on every point. A debate in Chinese economic history: was marginal output of labor in agricultu