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Assume a firm uses labor and capital to make shoes. They pay workers a wage ( w ) and the cost of capital is r
Assume a firm uses labor and capital to make shoes. They pay workers a wage (w) and
the cost of capital is r. Let w equal $1.00 and r equal $1.00. Show what happens to labor demand when the following occurs. Start with nice convex isoquants. Show your work using graphs.
1.The wage triples.
2.Assume a production function of the form, Q = 2*L + 2*K. Start with the initial wage and cost of capital. Resolve the equilibrium and then let the wage triple, ceteris paribus.
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