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Activity Analysis

Author

Listed:
  • Bruce C. Dieffenbach

    (Independent author)

Abstract

Koopmans studies efficient production in activity analysis. An activity produces output and uses inputs. A production equilibrium is a price/quantity combination such that profit is maximized. The key results are first and second theorems of production equilibrium, analogous to the first and second theorems of welfare economics. The first theorem is that production equilibrium implies that production is efficient. The second theorem is that efficient production can be realized as a production equilibrium; for chosen prices, the production maximizes profit. This chapter obtains his ideas and results via perturbation duality. The primal studies whether activity levels can be changed to increase the net production of goods. The dual chooses goods prices to minimize the value of net output, such that no activity is profitable. Analyzing the primal and the dual obtains the first and second theorems of production equilibrium.

Suggested Citation

  • Bruce C. Dieffenbach, 2026. "Activity Analysis," Contributions to Economics,, Springer.
    • Handle: RePEc:spr:conchp:978-3-032-21396-9_15
    DOI: 10.1007/978-3-032-21396-9_15
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