Lecture 25 - Announcements HW ch 15 due Tonight HW ch 11-12...

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Announcements HW ch 15 due Tonight HW ch 11-12 due Monday HW ch 13 due next Thurs iClicker totals will be updated soon MT2 keys will be posted this afternoon
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THE DEMAND FOR INPUTS A FIRM EMPLOYING TWO VARIABLE FACTORS OF PRODUCTION IN THE SHORT AND LONG RUN In firms employing just one variable factor of production, a change in the price of that factor affects only the demand for the factor itself. When more than one factor can vary, however, we must consider the impact of a change in one factor price on the demand for other factors as well.
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THE DEMAND FOR INPUTS (kindof review) Substitution and Output Effects of a Change in Factor Price Response of a Firm to an Increasing Wage Rate TECHNOLOGY INPUT REQUIREMENTS PER UNIT OF OUTPUT UNIT COST IF P L = $1 P K = $1 ( P L x L ) + ( P K x K ) UNIT COST IF P L = $2 P K = $1 ( P L x L ) + ( P K x K ) K L A (capital intensive) 10 5 $15 $20 B (labor intensive) 3 10 $13 $23 The Substitution Effect of an Increase in Wages on a Firm Producing 100 Units of Output
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