A firm wishes to produce to Qunits of output using two inputs - ₁ and x2. The prices of the inputs are w₁ and w₂ respectively. Assuming the firm wants to keep its current production target, show the effect on the firm's optimal input choice in a diagram if the price of factor x₁ increases. In a separate diagram, derive the conditional factor demand for input x₁, i.e., the relationship between price of x₁ and quantity demanded for £₁.

A firm wishes to produce to Qunits of output using two inputs - ₁ and x2. The prices of the inputs are w₁ and w₂ respectively. Assuming the firm wants to keep its current production target, show the effect on the firm's optimal input choice in a diagram if the price of factor x₁ increases. In a separate diagram, derive the conditional factor demand for input x₁, i.e., the relationship between price of x₁ and quantity demanded for £₁.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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