By M. Buckett (Auth.)

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S u b s t i t u t i o n of O n e I n p u t Factor for A n o t h e r T h e a b o v e p a r a g r a p h s raise t h e whole q u e s t i o n of s u b s t i t u t i o n . e. t h e s u b s t i t u t i o n of o n e i n p u t for a n o t h e r . Clearly farmers are always interested in finding t h e "least c o s t " or cheapest way to p r o d u c e a given level of p r o d u c t . S o m e t i m e s alternative i n p u t s can b e u s e d to p r o d u c e a given p r o d u c t . T h e cheapest m e t h o d of p r o d u c t i o n m i g h t b e t h e use of j u s t o n e i n p u t factor a n d n o n e of a n o t h e r , b u t in o t h e r cases a c o m b i n a t i o n of t h e t w o factors m a y be cheapest.

Clearly farmers are always interested in finding t h e "least c o s t " or cheapest way to p r o d u c e a given level of p r o d u c t . S o m e t i m e s alternative i n p u t s can b e u s e d to p r o d u c e a given p r o d u c t . T h e cheapest m e t h o d of p r o d u c t i o n m i g h t b e t h e use of j u s t o n e i n p u t factor a n d n o n e of a n o t h e r , b u t in o t h e r cases a c o m b i n a t i o n of t h e t w o factors m a y be cheapest. If the s a m e a m o u n t of p r o d u c t c a n b e o b t a i n e d whilst o n e i n p u t factor X is gradually replaced by a n o t h e r X in such a way t h a t each t i m e t h e a m o u n t of X which replaces X is t h e s a m e , t h e n t h e m a r g i n a l rate of s u b s t i t u t i o n b e t w e e n t h e factors is c o n s t a n t or linear.

S o m e countries, including t h e U n i t e d K i n g d o m in t h e 1970s, decide from t i m e t o t i m e to let their currency float, w h i c h m e a n s t h a t it can fluctuate to find its o w n level o n t h e w o r l d m a r k e t w i t h o u t t h e rigidity of c o n t r o l t h r o u g h g o v e r n m e n t r e v a l u a t i o n s . After a p e r i o d of weakness, s o m e w h a t e q u i v a l e n t t o a p e r i o d of d e v a l u a t i o n , t h e Environmental Factors and Forecasting 25 p o u n d b e c a m e relatively strong in t h e late 1970s.

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