Monday, May 24, 2010

The cost function is given as c(w1, w2, q) = q[w1 + w2]. What are the conditional factor demands?

Note the production function is NOT provided and needs to be derived.

The cost function is given as c(w1, w2, q) = q[w1 + w2]. What are the conditional factor demands?
c(w1,w2,q)=q(w1+w2)


The Conditional Factor Demands or CFD is a function to know quantities of inputs. The function is related to output and prices of the different inputs involved.


CFD is more or less x1=x1(w1,w2, Y)


w1=price of input 1 or x1


w2=price of input 2 or x2


Y= total production


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