Increase in capital affect the graph of demand for labor

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Consider a production function that takes the form Q=20K^(3/4) * L^(3/4) and assume that capital is constant at 81. MP(L) = 5(K^3/4) * L^(-3/4) and MP(k)=15(k^-1/4)(L^(1/4))

a. If the real wage is equivalent to the marginal product of labor such that w=MPL=9, how much labor will be demanded? What happens to the demand for labor when the real wage declines to $5?

b. Now assume that the capital used in the production process is allowed to vary and increases to 256. Holding the real wage constant at $5, how much labor will be demanded? How does this increase in capital affect the graph of the demand for labor in (a)?

Reference no: EM13982636

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