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Presented By:: Cruz, Charmaine M. Dawis, Jenna Mae O. Vizarra, Leslie Joy P. BS Economics 3-2

This document discusses several economic concepts: 1) When income (y) increases in a linear utility function, utility always increases at a constant rate. 2) Quadratic and cubic production functions commonly have parameters where the quadratic and cubic terms are less than or equal to 0. 3) The marginal revenue productivity theory states firms hire workers until the marginal revenue product equals the wage rate. A concave marginal revenue product curve is only possible with a cubic production function under perfect competition.

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Charmaine Cruz
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56 views11 pages

Presented By:: Cruz, Charmaine M. Dawis, Jenna Mae O. Vizarra, Leslie Joy P. BS Economics 3-2

This document discusses several economic concepts: 1) When income (y) increases in a linear utility function, utility always increases at a constant rate. 2) Quadratic and cubic production functions commonly have parameters where the quadratic and cubic terms are less than or equal to 0. 3) The marginal revenue productivity theory states firms hire workers until the marginal revenue product equals the wage rate. A concave marginal revenue product curve is only possible with a cubic production function under perfect competition.

Uploaded by

Charmaine Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Presented by:

Cruz, Charmaine M.
Dawis, Jenna Mae O.
Vizarra, Leslie Joy P.
BS Economics 3-2
=+
-When you get more y (linear term)
you always get your utility and always
Increases by at a constant rate as you
get money.
= +
The parameters on quadratic and
cubic production functions are
quite common, i.e., e 0 and c 0
= + +
-The marginal revenue productivity theory
states that a profit maximizing firm will hire
workers up to the point where the marginal
revenue product is equal to the wage rate.
-A concave VMP (MRP) curve is possible only with the cubic function in
perfect competition.
-Even a cubic production function with negative coefficient on cubic term
must generate convex MRP curve in the efficient production stage where
marginal product approaches zero
= ()
Three dimensional with utility or output
measured along the vertical axis
To get the XY projection in the utility
function, simply take a given level of U=0 and solve for Y as a
function of X.
It illustrates several economic
concepts, such as scarcity of
resources, opportunity cost
productive efficiency, allocative
efficiency, and economies of scale.
states that demand creates its
own supply; changes in aggregate
demand cause changes in real GDP
and employment.

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