Production set: Difference between revisions
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In economics a '''production vector''' is a representation of a manufacturing process by a vector containing an entry for every commodity in the economy. Outputs are represented by positive entries giving the quantities produced and inputs by negative entries giving the quantities consumed. |
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A '''production set''' is the set of all combinations of inputs and outputs that achieve a [[technologically]] [[wikt:feasible|feasible]] way to produce.<ref>Intermediate Microeconomics, Hal R. Varian 1999,W. W. Norton & Company; 5th edition</ref> It is used as part of [[profit maximization]] calculations. |
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If the commodities in the economy are (''labour'',''corn'',''flour'',''bread'' ) and a mill needs one unit of labour to produce 8 units of flour from 10 units of corn, then its production vector is (–1,–10,8,0). If it needs the same amount of labour to run at half capacity then the production vector (–1,–5,4,0) would also be operationally possible. |
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The set of all operationally possible production vectors is the mill’s '''production set'''. |
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If '''''y''''' is a production vector and '''''p''''' is the economy’s price vector, then '''''p''''' ·'''''y''''' is the value of net output. The mill’s owner will normally choose '''''y''''' from the production set to maximise this quantity.<ref>Intermediate Microeconomics, Hal R. Varian 1999,W. W. Norton & Company; 5th edition</ref> |
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==See also== |
==See also== |
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Revision as of 16:20, 6 September 2020
In economics a production vector is a representation of a manufacturing process by a vector containing an entry for every commodity in the economy. Outputs are represented by positive entries giving the quantities produced and inputs by negative entries giving the quantities consumed.
If the commodities in the economy are (labour,corn,flour,bread ) and a mill needs one unit of labour to produce 8 units of flour from 10 units of corn, then its production vector is (–1,–10,8,0). If it needs the same amount of labour to run at half capacity then the production vector (–1,–5,4,0) would also be operationally possible.
The set of all operationally possible production vectors is the mill’s production set.
If y is a production vector and p is the economy’s price vector, then p ·y is the value of net output. The mill’s owner will normally choose y from the production set to maximise this quantity.[1]
See also
References
- ^ Intermediate Microeconomics, Hal R. Varian 1999,W. W. Norton & Company; 5th edition
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