Full graphics

New window

Allocation of

Labor and Capital

in the production of

Bread and Cloth

Factor endowments

L = 10 , K = 100

Fixed coefficient technology

per one loaf of bread

.5          8

per one yard of cloth

1           6

 

If we want 6 loaves of BREAD
we can produce at most 7 yards of CLOTH,
given the limited amount of LABOR   and CAPITAL
and existing technology of BAKING and WEAVING.

Note that in this case LABOR is fully utilized

but CAPITAL is not.