Examples a if f x1 x2 x1 x2 then cw1 w2 y

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Unformatted text preview: if f (x1 ; x2 ) = x1 + x2 , then c(w1 ; w2 ; y ) = minfw1 ; w2 gy b) if f (x1 ; x2 ) = minfx1 ; x2 g, then c(w1 ; w2 ; y ) = (w1 + w2 )y c) can calculate other answers using calculus B. Revealed cost minimization 1. suppose we hold output fixed and observe choices at different factor prices. s s 2. when prices are (w1 ; w2 ), choice is (xs ; xs ), and 1 2 t ; wt ), choice is (xt ; xt ). when prices are (w1 2 1 2 3. if choices minimize cost, then we must have t t t t w1 xt + w2 xt w1 xs + w1 xs 1 2 1 2 s s s s w1 xs + w1 xs w1 xt + w2 xt 1 2 1 2 4. this is the Weak...
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