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【正文】 isoquants z 2 Q expansion ray ? 0 G(t z) = t G(z) constant returns to scale Proportional increase in all inputs z 2 Q 0 t1? G(t z) t G(z) Increasing returns to scale Proportional increase in all inputs z 2 Q 0 t1? G(t z) t G(z) Decreasing returns to scale Proportional increase in all inputs z 2 Q isoquant Q =`Q 0 Take a horizontalsection...to get the isoquant again ? z 2 Q 0 … this gives us our next concept Now take a vertical section... ? ? Pick a technically efficient input vector ? Keep all but one input constant Q= G(z) ? Measure change in output . this input ?G(z) ????zi ____ MPi = Gi(z) = Marginal products z1 Q G(z) z1 Q G(z) z1 Q G(z) possible relationships between output and one input z1 Q G(z) Let39。 G1(z)/G2(z) The responsiveness of the input ratio to the MRTS is given by the elasticity of substitution ?log(z1/z2) ?log(G1/G2) ? Can be seen as the isoquant’s “curvature” Now for a special case... A constant elasticity of substitution: Increase the elasticity of substitution... z1 z2 Now look at the structure of the contour map... z1 z2 Homothetic contours z 1
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