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The Substitution effects of an increase in Wages on a firm Producing "100" unit of Output.


When PL (lower case L) = 1, Pk(lower case K)=1


What would be the total capital demand and the labor demanded.

I have the book, i am reading it over and over but I just can't figure howt they came up with that answer... and no, i don't have an exam later on.

2006-12-04 11:04:43 · 1 answers · asked by a100 1 in Science & Mathematics Mathematics

1 answers

Need more info, like the relationship between unit output, labor demanded, and non-labor capital demanded. The relation APPEARS to be

TC = 100*(W*hrs/unit + material cost/unit)

presumably, increasing wages will not change hrs/unit or mat'l/unit, so
∆TC/∆W = 100*hrs/unit

2006-12-04 11:20:42 · answer #1 · answered by Helmut 7 · 0 0

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