Cost Concepts for Decision Making:
Costs:
a) Explicit costs which involve a direct monetary outlay.Indirect costs that don’t involve outlays of cash.
b) Accounting Costs (total sum of explicit costs)Economic Costs (sum of explicit and implicit costs)
c) Opportunity Costs
d) Sunk (unavoidable) costs v/s Non-sunk (avoidable) costs, Initial set-up costs.
Cost-Minimization Problem:
a) iso-cost curve:
wL + rK = TC = C, K =[-(w/r) L]+ C/r
b) Cost minimization:
At point F, (slope of iso - cost curve) = (slope of isoquant curve). So, w/r = MRTSLKAnd we already know that MRTSLK = MPL/MPk= w/r or MPL/w= MPk/r
The last expression implies that the additional output per dollar spent on labor services equals the additional output per dollar spent on capital services (“equal bang for the buck”).
You are able to check the condition at points E and G.
How in regards the corner point solutions? Does the above equation grapple at the corner solution?
In general if we have m units of inputs, the cost minimization condition (FOC) is: c) Expansion Path:
Q0 < Q1< Q2
d) Comparative Statics Analysis of Changes in Input Prices: Demand for inputs is Derived Demand depending upon change in quantities of final products.
So, we can’t use the method in consumption theory to derive input demand curves.
To analyze the effect of change in input prices without considering change in quantities, we need to confine our analysis to change in input combinations that can produce same amount of output (analogous to consumption theory of only substitution effect!).
e) Cost Minimization in SR: When the firm’s capital is fixed at K, the short-run cost-minimizing input combination is at point F. If the firm were free to adjust each of its inputs the cost-minimizing combination would be at point A.
min(L,K)wL + rKsubject to: Q = f (L, K)
We proceed by defining a Lagrangean function
Λ(L, K, λ ) = wL + rK +λ[ f (L, K) − Q], where λ is a Lagrange multiplier.
The conditions for an interior optimal solution (L > 0, K > 0) to this problem are:
From (1) and (2), we can get MPL/MPK = w/r ............(4)
Equations (3) and (4) are two equations with two unknowns, L and K. They are alike to the conditions that we derived for an interior solution to the cost-minimization problem using graphical arguments. The solutions to these conditions are the long-run input demand functions:
L*(w, r, Q) and K*(w, r, Q) .
Example: Production function is Q = 50 √LK . What are the demand curves for labour as well as capital?
f) Duality: “Backing Out”
The above analysis shows how we can start with a production function and derive the input demand function. However we can also reverse directions: If we begin with input demand functions we can characterize the properties of a production function and sometimes even write down the equation of the production function. This is because of duality, which refers to the correspondence between the production function and the input demand function.
Example- Suppose we are given respective labour demand function and capital demand function:
L = Q/50(√r/w) and K = Q/50 (√w/r) Solving for w in terms of Q, r, and L: w = (Q/50L)2r
Plugging the last expression in capital demand function:
K = (Q/50) [(Q/50L)2r]1/2 = Q2/2500L Finally, Q2 = 2500LK, Q = 50 √LK = 50L0.5 K0.5
Latest technology based Microeconomics Online Tutoring Assistance
Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Microeconomics help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Microeconomics, project ideas and tutorials. We provide email based Microeconomics help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Microeconomics Homework help and assignment help services. They use their experience, as they have solved thousands of the Microeconomics assignments, which may help you to solve your complex issues of Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
tutorsglobe.com non-competitive inhibition assignment help-homework help by online enzyme inhibitor-concepts tutors
Natural gas origin tutorial all along with the key concepts of Formation of Natural Gas, Natural Gas under the Earth, Deep Natural Gas, Tight Natural Gas, Shale Gas, Coal Bed Methane, Geopressurised Zones, Methane Hydrates, Offshore Gas Fields, Stranded Gas
TutorsGlobe.com The Chemical Industry-An Overview Assignment Help-Homework Help by Online Access Chemistry Tutors
Electron Dynamics tutorial all along with the key concepts of Definition of electron dynamics, Effective mass and Current density
Theory and lecture notes of P versus NP Problem all along with the key concepts of the p versus np problem, homework help, assignment help, complexity p & np tutors. Tutorsglobe offers homework help, assignment help and tutor’s assistance on P versus NP Problem.
www.tutorsglobe.com offers circle homework help, geometry mathematics assignment help, online tutoring assistance, geometry mathematics solutions by online qualified math tutor's help.
The adjustments are to be prepared through alignment screw driver. At the very first, the output IF transformer (detector) is to be tuned, and after that middle transformer and at last the input IFT should tuned.
www.tutorsglobe.com offers Design Fundamentals homework help, assignment help, case study, writing homework help, online tutoring assistance by computer science tutors.
gas law-i tutorial all along with the key concepts of kinetic molecular theory of gases, boyle's law, charles' law, kinetic theory explains boyle's law, kinetic theory explains charles' law and general gas equation
tutorsglobe.com bergson-samuelson social welfare assignment help-homework help by online welfare tutors
Energy and Its Uses by Plant tutorial all along with the key concepts of What is Energy, Estimating Energy, Energy Interconversions, Energy Conversions, Laws of Thermodynamics
Algae tutorial all along with the key concepts of General features of Algae, Forms of algae, Reproduction in Algae and Importance of Algae
Find instant Animal Behavior Assignment Help service from phd experts at reasonable prices to secure top grades.
liquefaction of gases tutorial all along with the key concepts of history regarding liquefaction of gases, explanation of liquefaction of gases, uses of liquefied gases, critical temperature and pressure, methods of liquefaction, joule-thomson effect, applications of liquefaction of gases
tutorsglobe.com innate immunity assignment help-homework help by online immunology tutors
1965249
Questions Asked
3689
Tutors
1448766
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!