Two factors production model and isoquants
Summary
Factors of production
- Factors of production or inputs are what is used in the production process to produce output
- Classification of factors of production:
- Land
- Labor
- Capital
- Raw materials
Two factors production model
- Two factors of production
- \(x_1\) : amount of factor 1
- \(x_2\) : amount of factor 2
- Infinitely divisible, \(x_1≥0\) , \(x_2≥0\)
- A production function \(y=f\left( x_1,x_2 \right)\) relating the amount of output \(y\) produced using \(x_1\) and \(x_2\)
- A single firm that is to decide \(x_1\) and \(x_2\) and thereby \(y\) .
- A single point in time
Isoquants
- \(y=f\left( x_1,x_2 \right)\) is a production function
- A level curve for the production function is called an isoquant .
- Example: \(y=100\sqrt{x_1x_2}\)