Cost minimizing input choice, Microeconomics

Assignment Help:

The Cost Minimizing Input Choice

- Assumptions

  • Two Inputs: Labor (L) & capital (K)
  • Price of labor: wage rate (w)
  • The capital price

- R = depreciation rate + interest rate

- Question

  • If capital was rented, would it change the value of r?

* The Isocost Line

- C = wL + rK

- Isocost: A line which shows all the combinations of L & K which can be purchased for same cost

- Rewriting C as linear:

  • K = C/r - (w/r)L
  • Slope of the Isocost:

                  1222_isocost.png

is the ratio of wage rate to rental cost of capital.

* This shows the rate at which capital can be substituted for labor with no change in cost.


Related Discussions:- Cost minimizing input choice

What is an optimization in the methods of mathematics, What is an optimizat...

What is an optimization in the methods of mathematics of modern economics? Optimization is a basic tool for the development of modern microeconomics analysis. Many of economic

Cobweb therom, explain convergent and divergent system

explain convergent and divergent system

Iso curve, how do i make one on excel

how do i make one on excel

Significance of education to economic development, Normal 0 fal...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

The basics, the basics in micro economics

the basics in micro economics

Positive and normative statement, differentiate between normative and posit...

differentiate between normative and positive statements in economics with the help of a statement

Consumer behaviour, how do I explain the hicksian and slutsky theory of con...

how do I explain the hicksian and slutsky theory of consumer behaviour in an examination

Determine the price differential, Severe drought hit the coffee industry ha...

Severe drought hit the coffee industry hard this year; as a result, more people are now switching to tea. The first table below shows the original supply and demand quantities in t

Production, explain the concept economies/diseconomies of scale and minimum...

explain the concept economies/diseconomies of scale and minimum efficient scale

Calculate the percentages changes in the equilibrium, The economy, however,...

The economy, however, is facing inflationary pressures. To deal with the macroeconomic problem, the government uses expansionary fiscal policy to decrease taxes and, as an indirect

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd