Input substitution when the input price change, Microeconomics

Input Substitution When the Input Price Change

 Isoquants and Isocosts and Production Function

2278_production function.png

1616_input substitution.png

The minimum cost combination can be written as:

1726_input substitution1.png
- Minimum cost for a given output will occur when each dollar of input added to the production process will add an equivalent amount of output.

* Question

- If w = $10, r = $2, and MPL = MPK, which input would producer use more of?  Why? 

Posted Date: 10/12/2012 3:00:57 AM | Location : United States







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