Answer to Question #169272 in Microeconomics for Melese Girma

Question

1. Given the following production and cost function

 

Given by Y=15L0.4 K0.5 (Production function) C=W1L+W2K+100 (Cost Function)

Where L= labor, K= capital,

 

A) Compute the following

 

B) Expansion path (2 points)

 

vii. Elasticity of substitution (2 points)

 

viii. Return to scale (2 points)

 

ix. Indicate the relationship between elasticity of substitution and scale. (2 points)

 

B) Using output constrained optimization derive the following

 

 

i. Input demand functions (3 points)

 

ii. Minimum cost function (3 points)

Answer 1

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