Re: ISI 2013 eco doubt

Posted by kangkan on May 03, 2014; 7:25am
URL: http://discussion-forum.276.s1.nabble.com/ISI-2013-eco-doubt-tp7587987p7588343.html

Hi..once the labour is hired..i have him for the the entire 10 hours..since the price is constant , and the once hired,the labour is a sunk cost, my problem is to maximize out put given the factor supply...

let me produce x1 of og good k1 and x2 of good k2... i will use use x1/10 and x2/20 hours of the labour respectively..hence my budget constraint is x/10 +x2/20 =10.

now my probel is max root over x1*x2 subject to x1/10+x2/20=10..apply lagrangean multipier..we get x1=50 and x2=100...at this inputs y=38..profit will 38.7-20>0..hence it will be profitable for me to hire the labour