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Producers: Labor Markets
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Labor supply (consumers)
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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
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MPL (interpretation)
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Short Run (fixed K) Profit maximization Price taking
Example (Short run)
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Short run: Demand for Labor
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Labor Market: Equilibrium
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Labor Market: Equilibrium
Capital Technology Preferences
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Labor Market: Minimal Wage
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Long run ( not fixed) We choose simultaneously and
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Long run
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Profit Maximization and CRS
Suppose that are optimal What can we say about at ? Profit maximization not always well defined
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