{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Econ501aL13

# Econ501aL13 - Demand for Inputs Since prots are = p x f K;L...

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
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Demand for Inputs Since prots are = p x f ( K;L ) wL rK; the prot maximizing choice of L satises @ @L = 0 = p x MP L w: Thus, the rm hires labor until the amount of revenues generated by one more labor hour equals the hourly wage. Treating K as xed, so MP L depends only on L, the equation for the rm's labor demand curve is w = p x MP L . Similarly, holding L xed, the rm's demand for capi- tal is r = p x MP K . Demand for inputs are derived from demand for out- puts. The Firm's Long Run Prot Maximization Problem (or the short run prot maximization problem with 2 variable inputs) In the long run, the rm chooses all inputs to max- imize prots. Setting up prots as a function of L and K and optimizing (approach 1, discussed earlier) yields the rst order conditions: @ @L = 0 = p x MP L w @ @K = 0 = p x MP K r; which can be solved simultaneously for L and K, then plugged into the production function to nd x....
View Full Document

{[ snackBarMessage ]}

### Page1 / 7

Econ501aL13 - Demand for Inputs Since prots are = p x f K;L...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online