Activity Analysis in Production Economics

Abstract

This chapter opens with the historical root of activity analysis. The framework of activity analysis admits multiple techniques to produce a commodity. Substitution theorems investigate when the market mechanism singles out a best technique for each product and if the best techniques vary with the data of an economy, such as resource availabilities. Houthakker’s Theorem initiated a literature on the relationship between the distribution of activities and the form of the aggregate production function. Activity analysis is connected to modern input-output analysis, where the numbers of products and industries differ, which facilitates the measurement of the efficiency of the production units of an economy and of the economy.