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SF11

SF11

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Published by jamesyu

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Published by: jamesyu on Feb 22, 2008
Copyright:Attribution Non-commercial

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07/04/2010

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Cost Constraint/Isocost Line
 
COST CONSTRAINT
C= wL + rK(m = p
1
x
1
+p
2
x
2
)w: wage rate (including fringe benefits,holidays, PRSI, etc)r: rental rate of capitalRearranging:K=C/r-(w/r)L
 
COST CONSTRAINT
LKRepresents society’swillingness to tradethe factors of production C=wL+rKC/wC/r Slope of theisocost =
K/
L=
δ
K/
δ
L=(-) w/r (-) w/r 

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