chapter20_2009 - Intermediate Micro II Instructor: Prof...

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Econ 2350M Winter 2009 1 Intermediate Micro II Instructor: Prof Berta Esteve-Volart Department of Economics, York University Chapter 20 – Cost Minimization Note: Only for students of Econ 2350M
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Econ 2350M Winter 2009 2 Two decisions : 1) How to minimize costs of producing given quantity, q 2) Which q to produce Æ This chapter addresses first one
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Econ 2350M Winter 2009 3 Cost Minimization Problem of the firm here: Solution (minimum costs to achieve y) is written c(w 1 , w 2 , y) y x x f that such x w x w x x = + ) , ( min 2 1 2 2 1 1 , 2 1
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Econ 2350M Winter 2009 4 Isocost lines • We use two inputs, x 1 and x 2 • Lines that represent a given level of costs, C : w 1 x 1 + w 2 x 2 = C • To plot this in the x 1 , x 2 graph rewrite as: 1 2 1 2 2 x w w w C x =
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Econ 2350M Winter 2009 5 • Every point in one isocost line has same cost ( C ) • Higher isocost lines are associated with higher costs • Slope of isocost lines: -w 1 /w 2 X 1 X 2 Slope= - w 1 /w 2 2 w C
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chapter20_2009 - Intermediate Micro II Instructor: Prof...

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