ap economics mr. bernstein module 72: cost minimizing input combinations november 10, 2014
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AP Economics
Mr. Bernstein
Module 72: Cost Minimizing Input Combinations
November 10, 2014
2
AP EconomicsMr. Bernstein
Least-Cost Combination of Inputs• Substitutes in the Factor Markets• Nail gun vs. Labor + hand held hammers• Trackhoe vs. Labor + shovels• ATM vs. bank teller• Programming labor from India vs. Jersey
• Compliments in the Factor Market• Trackhoe and operator• 747 jet and pilot
3
AP EconomicsMr. Bernstein
Least-Cost Combination of Inputs• Cost Minimization Rule: MPL/w = MPK/r• If marginal product per dollar of labor and capital are
not equal, firm will adjust to find optimal mix
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