| OCR Text |
Show It might be interesting to pause here for a moment and examine the impli - cation behind our first definition of marginal value product. We will do this for only the income criterion. Let the Leontief- type production function for the output of the jth sector be: Wi N- ( 1) J Vaij a2j an1 Vu N0] J , aij a2j anj Vlj « 0j, where the xjj are the total flows from the endogenous sectors, Wj is total water intake, Nj is total employment, and a^, V] j, and n0, are the relevant technical coefficients. The graph below describes part of this function. For the present, assume that the sector is operating at point " a" on isoquant X.:. Now the value of the partial derivative dX./ dW- equals zero in the pure ceteris paribus case when there is an increase in water intake, for in this case the sector moves from " a" to " c". Since such a move would not change Xu household income ( Y) would not change and the marginal value of water in terms of income would be zero. That is, / 0. dY4 , dXi . ( 2) _ J. = h0j _ JL = 0, dWi dWi 25 |
