lecture14full

lecture14full - Properties of cost functions Property 1:...

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Recap 1 Isoquants and the Technical Rate of Substitution 2 Quasi-concavity and Concavity Returns to scale affected concavity but not quasiconcavity 3 Profit maximization with multiple inputs
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Example 4
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Corner Solutions When isoquants are linear or bowed the wrong way, use only l or only k
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Corner Solutions Will have a corner solution in how much you produce when f ( l , k ) is CRTS or IRTS
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Cost Minimization
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Cost Minimzation 2 min l , k wl - rk subject to x = l 1 / 5 k 3 / 5
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Conditional input demands
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Properties of conditional input demands Property 1: HD0 in input prices Property 2: Decreasing in own input price
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Cost functions Substitute conditional input demands into expenditures
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Unformatted text preview: Properties of cost functions Property 1: HD1 in input prices Property 2: Increasing in input prices Property 3: Increasing in x Property 4: Shephards Lemma C ( w , r , x ) w = l c ( w , r , x ) Cost functions to supply functions max x px-C ( w , r , x ) Back to input demands Substitute supply function in for x in the conditional input demands to get (unconditional) input demands. Short and long run supply curves Short and long run supply curves 2 Short and long run input demand curves Short and long run input demand curves 2...
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lecture14full - Properties of cost functions Property 1:...

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