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Production Function

F(X)= (L,K)

Definitions

MP

AP

TP

TP/L

🔺 TP/ 🔺 L

Production

Zones

2

3

1

Both

L Only

Reduce

Dl Competitive

VMP=P*MP

VMP = MRP

MWC=W

Hiring

MRP=MWC

DI Uncompetitive

MRP < MVP

Inelastic

WageBill ⬆

Inelastic W ⬆

Elastic W ⬇

Elasticity Determinants

Q Demand

Labor Cost : Total Cost

Substitutablity

Supply of Inputs

Long Run

Substitution Effect

Output Effect

Determinants

Demand

Productivity

Employers

Resource Price

Complements

Substitutes