1. Lectures in Microeconomics-Charles W. Upton Changes in Factor Prices

2. Remember our basic cost function C = C(q,r,w)

3. Changes in Factor Prices Remember our basic cost function C = C(q,r,w) So far, we have not worried about r and w. Now we will.

4. Changes in Factor Prices C = C(q,r,w) The Impact of a change in factor prices on the market

5. Changes in Factor Prices C = C(q,r,w) The Impact of a change in factor prices on the market. How a shift in market demand can cause a change in factor prices

6. Changes in Factor Prices An Exogenous Change Suppose the price of a factor of production changes.

7. Changes in Factor Prices An Exogenous Change Suppose the price of a factor of production changes. While there is obviously some substitution, there will be an increase in cost.

8. Changes in Factor Prices An Exogenous Change Suppose the price of a factor of production changes. While there is obviously some substitution, there will be an increase in cost. This is called an exogenous (external) change.

9. Changes in Factor Prices An Exogenous Change p* q*

10. Changes in Factor Prices An Exogenous Change p* D q*

11. Changes in Factor Prices An Exogenous Change p* D q* Q* Q*=N*q*

12. Changes in Factor Prices An Exogenous Change p* D q* Q* p** q**

13. Changes in Factor Prices An Exogenous Change p* D q* Q* p** q** Q** Q**=N**q**

14. Changes in Factor Prices An Exogenous Change p* D q* Q* p** q** Q** Price goes up. Quantity sold goes down. Average size of firm and number of firms indeterminate.

15. Changes in Factor Prices End ©2006 Charles W. Upton