Technological efficiency

[vnysot]

I make reference to page 93 in volume II.

Technological efficiency- generating the most output with the fewest inputs. The example and table listed at the bottom of the page concludes that method C is technologically inefficient. Vis-a-vis method B, that makes sense, but couldn't you argue that methods A and D are also inefficient since they use more capital and labor, respectively, versus method C?

Opinions?

Thanks

 

[ruhi22]

I don't have the textbook with me, but for technological efficiency, what I used to do is "count" the total number of inputs (labor hours, capital etc.). The one with the lowest number is technologically efficient.

This is not the same as economically efficient- that would be a process with the lowest COST. So, even if the inputs are the lowest, the cost might always be high.

Hope this helps.

 

[vnysot]

Thanks for the explanation, and that makes sense to me. However, the book cites 4 examples:

A- 1 labor, 1000 capital
B- 10 labor, 10 capital
C- 100 labor, 10 capital
D- 1000 labor, 1 capital

The text goes on to say that A, B, and D are technologically efficient because A uses less labor than B, and D uses less capital than B... but what about C? It uses less capital than A and less labor than D...not quite sure why method C was singled out here.

 

[ruhi22]

What the textbook is doing is comparing the labor betn. A & B first. and then capital betn. D&B. B is the reference point here. When you consider labor, don't think about capital and when you consider capital, don't think about labor. Not sure why they have explained in such a way though, but they want you to think about both the inputs in a mutually exclusive manner for now to simplify the process, I guess.

Yes, you are right abt C. It uses less capital than A, so capital wise only, it's more efficient than A. and labor wise, it's more efficient than D.

 

[killamanjaro]

Because you're attempting to make 10 TV sets using the least amount of inputs.

Method B or production line uses the least amount of capital and labor to produce 10 TV sets. Method C uses ten times the labor to produce the same amount of TV sets - therefore C is less efficient.