Tutorial 5 Production Possibility Frontiers Matthew Robson Introduction
Tutorial 5: Production Possibility Frontiers Matthew Robson
Introduction
Perfect Substitutes
Perfect Complements
Edgeworth Box
Edgeworth Box – Perfect Substitutes; Firm 1
Edgeworth Box – Perfect Substitutes; Firm 2
Edgeworth Box – Perfect Complements; Firm 1
Edgeworth Box – Perfect Complements; Firm 2
Production Possibility Frontier -Find the Contract Curve (locus of efficient points) -Take any isoquant for Firm 1 and find the point where the Output of Firm 2 is the highest (n. b. for Perfect Complements this will be an area not a point) -Repeat for all isoquants for Firm 1 -Explain why this Contract Curve is where it is -Construct the Production Possibility Frontier -Take each point on the contract curve -Plot the Output of Firm 2 against the Output of Firm 1, for these points -Notice a kink point, is this optimum in any sense?
Edgeworth Box – Perfect Substitutes
Edgeworth Box – Perfect Complements
Production Possibility Frontier; Perfect Substitutes
Production Possibility Frontier; Perfect Complements
Cobb-Douglas Technology
Cobb-Douglas Technology
Cobb-Douglas; Lagrange (1) (2)
Cobb-Douglas; Quantities From (1) (3) From (2) (4) (3) = (4) (5)
Cobb-Douglas; Output
y 2 Cobb-Douglas; Possibility Production Frontier y 1
y 2 Cobb-Douglas; Possibility Production Frontier y 1
y 2 Cobb-Douglas; Possibility Production Frontier y 1
Cobb-Douglas; Price Takers
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