Draw isocost curves that are tangent to your isoquants and that each have the same slope. Mark
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Draw isocost curves that are tangent to your isoquants and that each have the same slope. Mark the points of tangency and note the capital/labor ratio. Draw new, fl atter isocost curves that are tangent, again each having the same new slope. Mark the points of tangency and note the capital/labor ratio. In which case is the change in the capital/labor ratio greater? Which will have a higher elasticity of substitution?
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Related Book For
The Economics Of Health And Health Care
ISBN: 9781138208049
8th Edition
Authors: Sherman Folland, Allen C. Goodman, Miron Stano
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