1 / 9

Long-Run Demand for Labor

Long-Run Demand for Labor. Production Function: Q = F(K, N) Assume diminishing marginal product of labor and capital Both K and N are variable in the long run Isoquant: All combinations of K and N that yield the same level of output Slope = - MP N MP K. Long-Run Demand for Labor.

omer
Download Presentation

Long-Run Demand for Labor

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Long-Run Demand for Labor Production Function: Q = F(K, N) Assume diminishing marginal product of labor and capital Both K and N are variable in the long run Isoquant: All combinations of K and N that yield the same level of output Slope = - MPN MPK

  2. Long-Run Demand for Labor w = wage (rental rate on labor) r = rental rate on capital C = cost Isocost (Isoexpenditure) line: All combinations of K and N that yield the same level of cost C = rK + wN rK = C – wN K = C/r – (w/r)N Slope = -(w/r)

  3. Long-Run Demand for Labor = = Cost minimizing combination of K, N MPN P*MPN w MPK P*MPK r

  4. Long-Run Demand for Labor = = Cost minimizing combination of K, N MPN P*MPN w MPK P*MPK r Short-run Maximization

  5. Peter F. Orazem (1998) “Empirical Isoquants and Observable Optima: Cobb and Douglas at Seventy” Review of Agricultural Economics 20: 489-501.

  6. Q=1 Peter F. Orazem (1998) “Empirical Isoquants and Observable Optima: Cobb and Douglas at Seventy” Review of Agricultural Economics 20: 489-501.

  7. Q=1 Peter F. Orazem (1998) “Empirical Isoquants and Observable Optima: Cobb and Douglas at Seventy” Review of Agricultural Economics 20: 489-501.

  8. K/N W Peter F. Orazem (1998) “Empirical Isoquants and Observable Optima: Cobb and Douglas at Seventy” Review of Agricultural Economics 20: 489-501.

  9. K/N As w increases relative to r, move to more capital intensive production methods W Peter F. Orazem (1998) “Empirical Isoquants and Observable Optima: Cobb and Douglas at Seventy” Review of Agricultural Economics 20: 489-501.

More Related