FIN30210 Lecture Notes - Lecture 10: Isoquant
Document Summary
The output of elasticity of a variable input. *elasticity of labor = percentage change in the quantity produced here gives some percentage change of the price of labor. Suppose we have 1% increase of the the amount of labor we want to use, we can now see the change in quantity given that increase. Sensitive to changes in labor: elasticity number high. Insensitive to changes in labor: elasticity number low. Elasticity calculations are just the exponents attached to all of us inputs. 1% increase of the amount of labor results in a beta % change in our quantity produced. Marginal products are greater than our average products. Firms want to extract all of the benefit out of stage 1. So going to produce all the way through and add labor all the way through stage 1. Doing the best that we can in this stage. An isoquant is a brand new representation of something.
