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L15 Producers.

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Presentation on theme: "L15 Producers."— Presentation transcript:

1 L15 Producers

2 Producers Producers: have a technology
Technology given by production function Two inputs: Capital and Labor Example MPL and MPK (decreasing) Short and Long run (fixed K or not) Constant Returns to Scale

3 Short Run (fixed K) Profit maximization Price taking
Example (Short run)

4 Short run: Demand for Labor

5 Labor Market: Equilibrium

6 Labor Market: Equilibrium
Capital Preferences Taxes

7 Labor Market: Minimal Wage

8 Long run ( not fixed) We choose simultaneously and

9 Long run

10 Profit Maximization and CRS
Suppose that are optimal What can we say about at ? Profit maximization not always well defined

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