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This is the weak axiom of cost minimization wacm 5

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Unformatted text preview: Axiom of Cost Minimization (WACM) 5. what does it imply about firm behavior? Cost Minimization 126 6. multiply the second equation by 1 and get t t t t w1 xt + w2 xt w1 xs + w1 xs 1 2 1 2 s s s s w1 xt w1 xt w1 xs w2 xs 1 2 1 2 7. add these two inequalites: t s t s (w1 w1 )(xt xs ) + (w2 w2 )(xt xs ) 0 1 1 1 1 w1 x1 + w2 x2 0 8. roughly speaking, ``factor demands move opposite to changes in factor prices'' 9. in particular, factor demand curves must slope downward. C. Returns to scale and the cost function 1. increasing returns to scale...
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