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Producers Equilibrium or Optimal Combination of Inputs
The analysis of production function has demonstrated that alternative combinations of factors of production that are technically efficient can be used to produce a given level of output. Of these, firm will have to choose that combination of factors that will cost it the least. In this way firm can maximise its profits. Choice of any particular method from a set of technically efficient methods is an economic one and it's based on the prices of factors of production at a specific time.
Firm can maximise its profits either by maximising the level of output for a given cost or by minimising the cost of producing a given output. In either case, factors would have to be used in optimal combination at which the cost of production will be minimum.
There are two ways to determine the least cost combination of factors to produce a given output. Which is,
Shifts in demand curve Shifts in the demand curve are brought about by the changes in factors like taste, prices of other related commodities, income etc other than the price
Suppose you have estimated the following demand function for the product you sell: Q = 5 - 0.2P At what price will the demand for your product be unitary elastic? (Hint: B
Compensatory Financing Two other schemes for alleviating the effects of commodity trade instability have been operating for a number of years. These are the IMF's Compensator
The Basis of Wage Claims The union's demand for higher wages is normally based on one or more of the following four arguments: 1. The cost of living argument This is
Write on one theory of profit. Profit as rent of ability: one of the most widely known theories of profit was propounded by F.A. Walker. According to him profit is the rent of is t
Question: i) If X and Y are different processes producing the same commodity and the joint total cost (TC) is given by: TC = X 2 + 2Y 2 - 3XY Using Lagrange Multiplier,
(i) Do the laws of economics still work today? (use the case discussed in class to answer this question or any other examples) (ii) Provide examples of three factors that can sh
Suppose that Betsy's utility function is given by the equation U=Y0.3 where Y is calculated in thousands of dollars. Betsy's present job pays her $20,000 (Y=20) per year and she ca
What will be the table of total cost function?
Q. What is Right Angled Isoquant? This presumes zero substitutability of factors of production. There is just one method of producing any one commodity. In this case, isoquant
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