1
1
Production Functions
[See Chap 9]
2
Production Function
• The firm’s production function for a
particular good (q) shows the maximum
amount of the good that can be produced
using alternative combinations of inputs.
q= f(z1,… , zN)
• Examples (with N=2):
– z1= capital, z2= labor.
– z1= skilled labor, z2= unskilled labor
– z1= capital, z2= land.
3
Marginal Product
• The marginal product is the additional output
that can be produced by employing one more
unit of the input while holding other inputs
constant:
1
1
11
ofproduct marginal f
z
q
MPz =
∂
∂
==
