Suppose that there is perfectly competitive input and output market. Firm Yummy Beans produces canned beans which it sells at price $10 per can. Suppose that initially the firm's production function is given by

f(E, K) = E

A technological innovation has occurred however. A researcher at MIT came up with a better technology of preparing beans and so now the production function is

f(E, K) = 2 E

Question 2.1 Derive the labor demand for the old and the new technology and sketch them in a figure

Question 2.2 Suppose the market wage is $3. How much more or less labor will the firm use once it switches to the new production technology?

Question 2.3 Explain intuitively why labor demanded by the firm went up or down in part Q 2.2