1
Lesson 21
1
Proof of factor-price-equalization theorem
In this lesson, we “prove” the factor-price-
equalization theorem
The “proof” is by way of example, and is
therefore not completely general
Generalization requires more advanced
mathematical techniques
Lesson 21
2
Recall our familiar notation:
the amount of labor used
to produce one unit of
LX
a
X
=
the amount of labor used
to produce one unit of
LY
a
Y
=
Lesson 21
3
Recall our familiar notation:
the amount of capital used
to produce one unit of
KX
a
X
=
the amount of capital used
to produce one unit of
KY
a
Y
=

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