Answer to Question #198333 in Microeconomics for bun

Question

An important distinction in economics is between shifts

of the production function and movements along with the

production function. For the food concession in question

5, give an example of both a shift of and a movement

along with the hot-dog production function. Illustrate

each with a graph of the relation between hot-dog production

and labor employed.

Answer 1

In the food concession referred to, there is a decline in the demand of hot-dogs.This decline also impacts on the production of the hotdogs in the following ways.

(i) the inputs of production i.e labour and capital are altered. Firstly with the aim to maintain the labour force the capital is reduced so that the hot-dogs produced will on meet the prevailing demand in the market. In this scenario, there is a downward shift by the production function as shown in the graph below

ii) Secondly, in order to reduce the production while maintaining the capital( cost) the labour is reduced accordingly.In this scenario, there will be a movement along the production function to the left. This is illustrated in the graph below.