204_summer_2009_lecture_11

204_summer_2009_lecture_11 - University of Toronto...

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Unformatted text preview: University of Toronto Department of Economics ECO 204 Summer 2009 Sayed Ajaz Hussain Lecture 11 1 Ajaz Hussain. Department of Economics. UToronto In the past .. Derived cost functions axiomatically Assumed we know production technology Did CMP and obtained cost function In the Prestige Telephone Company case: Contribution analysis required estimate of AVC To compute AVC we needed cost function Cost function was estimated by: Plotting dollars cost vs. hours (output) Guessing cost function was linear Estimating intercept and slope of linear cost function Ajaz Hussain. Department of Economics. UToronto 2 Today That cost functions can be estimated from data, suggests that we can also estimate: Demand functions Production functions Cost functions from real data Demand estimation Linear vs. log linear models Production function estimation CES production function Cost function estimation Trans log production function Ajaz Hussain. Department of Economics. UToronto 3 204: Axiomatic Approach Ajaz Hussain. Department of Economics. UToronto 4 Consumers Producers Preferences UMP Demands for Goods 1 & 2 Technology Long Run CMP Demands for L & K Cost Function Example: 204 Axiomatic Approach Ajaz Hussain. Department of Economics. UToronto 5 Cobb Douglas Preferences UMP Q 1 = ( / + )Y/P 1 Q 2 = ( / + )Y/P 2 Cobb Douglas Technology Long Run CMP L = q 1/( + ) [( / )(P K /P L )] /( +...
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204_summer_2009_lecture_11 - University of Toronto...

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