This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Short Run Cost Functions In the short run, one or more inputs are xed, so the rm chooses the variable inputs to minimize the cost of producing a given amount of output. With several variable inputs, the procedure is the same as long run cost minimization. For example, if we have f ( K;L;Land ) and Land is xed, we solve the cost minimization problem to nd the demand for capital and labor, conditional on input prices and x, K ( w;r;x ) and L ( w;r;x ). Then we evaluate the cost of K, L, and Land to get the total cost function. With one variable input, things are quite a bit easier, since there is no substitutability between inputs. Suppose that we have a xed amount of capital, K . Then the production function can be interpreted as a function of L only. For example, if we have f ( K;L ) = K L , then the short run production function is f ( L ; K ) = K L : To nd the conditional labor demand, we invert the short run production function by solving x = f ( L ; K )...
View
Full
Document
 Spring '08
 YANG
 Microeconomics

Click to edit the document details