Search results with tag "Marginal rate"
Problem Set 2: Solutions Problem 1 (Marginal Rate of ...
www.ssc.wisc.eduProblem 1 (Marginal Rate of Substitution) (a) For the third column, recall that by de nition MRS(x 1;x 2) = @U @x1 @U @x2 . Utility Function @U @x 1 @x 2 MRS(x 1;x 2) MRS(2,3) (i) U(x 1;x 2) = x 1x 2 x 2 x 1 x 2 x 1 3 2 ... (Marginal utility per dollar spent is equalized.) { Note: An equivalent way of writing this is MU 1 MU 2 = p p 2 (using ...
CHAPTER 7 THE COST OF PRODUCTION - University of Houston
uh.eduThe marginal product of labor is dQ dL = 2KL. The marginal product of capital is dQ dK = L2. Set the marginal rate of technical substitution equal to the input price ratio to determine the optimal capital-labor ratio: 2 15 2 10 KL L = , or K = 0.75L. Therefore, the capital-labor ratio should be 0.75 to minimize the cost of producing any given ...
20. Homogeneous and Homothetic Functions
faculty.fiu.eduOf course, the calculation for the marginal rate of technical substitution is essentially the same. Consequences of this include that facts that income expansion paths and scale ex-pansion paths are rays through the origin whenever the original production or utility function is homogeneous. x y