Microeconomics Corso E

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MicroeconomicsCorso E

• John Hey

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Chapter 14

• Production possibility frontiers.
• Case 1 linear technology ... two people.
• Case 2 non-linear technology ... two firms and
  two inputs.

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Case 1

• Two individuals A and B. Two goods 1 and 2.
• Individual A can produce 120 units of good 1 or
  60 units of good 2 ... or any linear combination,
  for example 60 of good 1 and 30 of good 2.
• Individual B can produce 20 units of good 1 or 40
  units of good 2 ... or any linear combination,
  for example 10 of good 1 and 20 of good 2.
• Lets go to Maple.

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Case 2

• Two firms A and B. Two produced goods 1 e 2. Two
  inputs 1 and 2.
• Firm A has Cobb-Douglas technology with
  parameters a0.63 and b0.27.
• Firm B has Cobb-Douglas technology with
  parameters a0.54 and b0.36.
• The quantities of the two inputs in society
  are100 and 100.
• Society has to allocate the inputs to the two
  firms.
• Lets go to Maple.

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Chapter 14 Summary

• In a linear society the production possibility
  frontier is concave.
• In a non-linear society with decreasing returns
  to scale the production possibility frontier is
  concave.

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Capitolo 14

• Goodbye!

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