Cost Structure


In the engineering perspective on technology, we look at the process by which inputs are transformed into outputs (Figure 6.1).

A new perspective on technology reveals to us when we study the cost of the technology rather than its input–output structure. In the economic perspective, we add information about the prices of each input, from which we can calculate the total cost of all inputs together, but we suppress the details about the process of transforming inputs into outputs. The economic perspective is therefore pictured as in Figure 6.2.

In Chapter 2, we studied how to measure the capacity of a device as an indicator of size. The interesting economic question about capacity is whether large devices are ...

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