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