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Alternative Production Models in Economic Theory

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  • Martin Dlouhý

Abstract

In the paper, marginal analysis and linear programming are described and then compared as two independent theoretical approaches to production theory. Although marginal analysis dominates economic literature, we argue that linear programming is an equivalent theory with some advantages and, of course, some disadvantages in comparison to marginal analysis. Marginal analysis will be a more suitable choice if we assume continuous changes and perfect substitution in production and unlimited capacities of production factors. On the other hand, linear programming describes production as a combination of a finite number of available technologies with limited capacities of production factors. However, the best choice is likely to combine both the approaches to complement one another. It is a paradox that many economic students know linear programming from operational research or management science courses, but they have no notion that linear programming is also one of the basic tools of quantitative economic analysis.

Suggested Citation

  • Martin Dlouhý, 2011. "Alternative Production Models in Economic Theory," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2011(5), pages 34-47.
  • Handle: RePEc:prg:jnlaop:v:2011:y:2011:i:5:id:345:p:34-47
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    More about this item

    Keywords

    production theory; production function; linear programming; marginal analysis;

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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