LN04: Production economics

math review
EEE 452: Engineering Economics
Md. Naqib Imtiaz Hussain
Exercise: 6.1 Find Isoquant
Problem 6.2
Problem 6.11
 Problem 6.11
Q=10 Q=20 25
L K K
20
1 11 21
2 4.5 7 15
3 4.1 5.2 Q=10
10 Q=20
4 4.625 5.25
5 5.4 5.8 5
6 6.27 6.55
7 7.20 7.41 0
0 5 10 15
8 8.15 8.31
9 9.12 9.25
10 10.1 10.2
 Problem 6.11
45
40
35
30
25 Q=10
20 Q=20
15 Q=40
10
5
0
0 2 4 6 8 10 12
Whats happening here?
 Problem 6.12

Can you draw isoquant?

Any similarity with this equation to some
known equation, linear, quadratic etc…?

Think
Exercise 6.5
 Exercise 6.5

Draw the curve

Problem 6.27
 Problem 6.28
• A firm’s production function is initially

• Over time, the production function changes to

• (Assume that L =>1 and K=>1)

– a) Verify that this change represents technological
progress.
– b) Is this change labor saving, capital saving, or neutral?
 Problem 6.29
• A firm’s production function is initially

• Over time, the production function changes to

• (Assume that L =>1 and K=>1)

– a) Verify that this change represents technological
progress.
– b) Is this change labor saving, capital saving, or neutral?
Answer the right 3 columns
Cobb–Douglas Production Function

α ß
𝑄 = 𝐴𝐿 𝐾
Where A, α and ß are positive constants
 Exercise 6.4
• Does a Cobb–Douglas production function
decreasing, or constant returns to scale?

Alpha =0.9 and beta = 0.4

 Problem 6.23
• A firm’s production function is

– a) Does this production function exhibit constant,

increasing, or decreasing returns to scale?
– b) What is the marginal rate of technical
substitution of L for K for this production
function?