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

Managrial economics, data of past 20 years regarding price, wage, employmen...

data of past 20 years regarding price, wage, employment, productivity, investment, profit or loss.

Explain opportunity costs using a ppf, Explain opportunity costs using a PP...

Explain opportunity costs using a PPF where investment goods are on one axis and consumption goods on the other. Again, a good definition of opportunity costs linked to the not

Pareto optimacy, what are criteria and conditions for pareto optimacy

what are criteria and conditions for pareto optimacy

Definition of labour force, Q. Definition of labour force? Labour Force...

Q. Definition of labour force? Labour Force:Total population of working-age people who are willing and able to work and who thus have ‘entered' labour market. Labour force incl

Economics, define economics in plural sense. .

define economics in plural sense. .

Organic protons and electrons, Organic biochemistry is really as well as bi...

Organic biochemistry is really as well as biochemistry. This is because the as well as atom is the central source of all existing creature's substances. 8 protons and 8 electro

Theory, who propounded the pure international theory of trade?

who propounded the pure international theory of trade?

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