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:

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

Balance of payments and developing economies, Balance of Payments and Devel...

Balance of Payments and Developing Economies: It is well-known in development economics that UDCs invariably start as debtor economies. In the process of development itself, t

Inflation and inflation types, Inflation Types Inflation is generally c...

Inflation Types Inflation is generally classified on the basis of its rate and causes, while rate-based classification of inflation refers to the severity of inflation or how h

Duopoly, write characterstics of duopoly

write characterstics of duopoly

HELP, Suppose Jean Splicer, an investor, buys $300,000 of shares of stock i...

Suppose Jean Splicer, an investor, buys $300,000 of shares of stock in a diversified bundle of Bio-tech firms and exactly one year later sells those shares for $315,000. Assume the

Explain the phrase price rationing means, Explain what the phrase “price ra...

Explain what the phrase “price rationing” means. Price rationing is the method by which the market system assigns goods and services to consumers while quantity demanded exceeds

Mortgage delinquency, The issue I like to discuss is the ‘US Mortgage Delin...

The issue I like to discuss is the ‘US Mortgage Delinquency'. The Mortgage Delinquency may be defined in simple term as the ‘repeated failure to make loan repayment on time'. The d

Demand and supply, Dance fans switches away from Dance music to R&B music A...

Dance fans switches away from Dance music to R&B music AND the price of MP3 players increases

Is the natural rate of unemployment includes frictional, Is the natural rat...

Is the natural rate of unemployment includes frictional, structural & seasonal unemployment? The natural rate of unemployment contains frictional, structural & seasonal unempl

Per unit tax and surplus, How does a

How does a

Theory of second best, prove the theorm with the help of diagram

prove the theorm with the help of diagram

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages