Varian_Chapter20_Cost_Minimization.ppt

《Varian_Chapter20_Cost_Minimization.ppt》由会员上传分享，免费在线阅读，更多相关内容在教育资源-天天文库。

1、ChapterTwentyCostMinimizationCostMinimizationAfirmisacost-minimizerifitproducesanygivenoutputlevely³0atsmallestpossibletotalcost.c(y)denotesthefirm’ssmallestpossibletotalcostforproducingyunitsofoutput.c(y)isthefirm’stotalcostfunction.CostMinimizationWh

2、enthefirmfacesgiveninputpricesw=(w1,w2,…,wn)thetotalcostfunctionwillbewrittenasc(w1,…,wn,y).TheCost-MinimizationProblemConsiderafirmusingtwoinputstomakeoneoutput.Theproductionfunctionisy=f(x1,x2).Taketheoutputlevely³0asgiven.Giventheinputpricesw1andw2

3、,thecostofaninputbundle(x1,x2)isw1x1+w2x2.TheCost-MinimizationProblemForgivenw1,w2andy,thefirm’scost-minimizationproblemistosolvesubjecttoTheCost-MinimizationProblemThelevelsx1*(w1,w2,y)andx1*(w1,w2,y)intheleast-costlyinputbundlearethefirm’sconditional

4、demandsforinputs1and2.The(smallestpossible)totalcostforproducingyoutputunitsisthereforeConditionalInputDemandsGivenw1,w2andy,howistheleastcostlyinputbundlelocated?Andhowisthetotalcostfunctioncomputed?Iso-costLinesAcurvethatcontainsalloftheinputbundlest

5、hatcostthesameamountisaniso-costcurve.E.g.,givenw1andw2,the$100iso-costlinehastheequationIso-costLinesGenerally,givenw1andw2,theequationofthe$ciso-costlineisi.e.Slopeis-w1/w2.Iso-costLinesc’ºw1x1+w2x2c”ºw1x1+w2x2c’

6、1x1+w2x2c’

7、oblemx1x2Allinputbundlesyieldingy’unitsofoutput.Whichisthecheapest?f(x1,x2)ºy’TheCost-MinimizationProblemx1x2Allinputbundlesyieldingy’unitsofoutput.Whichisthecheapest?f(x1,x2)ºy’TheCost-MinimizationProblemx1x2Allinputbundlesyieldingy’unitsofoutput.W

8、hichisthecheapest?f(x1,x2)ºy’x1*x2*TheCost-MinimizationProblemx1x2f(x1,x2)ºy’x1*x2*Ataninteriorcost-mininputbundle:(a)TheCost-MinimizationProblemx1x2f(x1,x2)ºy’x1*x2*Ataninteriorcost-mininputbundle:(a)and(b)slopeofisocost=slopeofiso