Results 1 to 2 of 2

Math Help - isocost/isoquant economics problem

  1. #1
    Newbie
    Joined
    May 2010
    Posts
    2

    isocost/isoquant economics problem

    Hi all, I've become really stumped on this problem. I'm starting to think the information given in the problem is wrong. Anyways, this is what I have.

    K=capital
    L=labor

    Q=150K^.75L^.25 where Q=2500

    TC = 5.50K + 8.50L

    w (wage rate)=8.50
    r (capital rate)=5.50

    Slope of isocost line = w/r = 8.50/5.50 = 1.55

    Slope of isoquant = mrts = .25K/.75L which reduces down to .33K/L

    Set the two slopes equal so 1.55=.33K/L

    1.55L=.33K, solve for L so L=.21K


    Now at this point, I believe everything I have done is right because it's not hard calculations.

    Plug that L=.21K into the original function so, 2500= (150K^.75)(.21K^.25), which reduces to 2500=31.5K and K=79.37

    Multiply 79.37 by .21 to get L and I got L=16.67.

    I don't think my math is wrong there but it could be. But when you put 79.37 and 16.67 back in for K and L in the original function, the output is somewhere around 8000 which is clearly not 2500. Is there anything anyone may see that I could have messed up on? Thank you for any help!
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Newbie
    Joined
    May 2010
    Posts
    2
    Nvm, solved it!
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Economics problem help.
    Posted in the Business Math Forum
    Replies: 3
    Last Post: July 4th 2011, 02:37 AM
  2. Economics Problem Help
    Posted in the Business Math Forum
    Replies: 3
    Last Post: June 26th 2011, 09:30 AM
  3. Economics Problem
    Posted in the Differential Equations Forum
    Replies: 7
    Last Post: December 9th 2010, 12:57 PM
  4. economics
    Posted in the Math Topics Forum
    Replies: 0
    Last Post: May 14th 2009, 08:33 PM
  5. Economics Problem
    Posted in the Algebra Forum
    Replies: 1
    Last Post: March 9th 2008, 12:04 PM

Search Tags


/mathhelpforum @mathhelpforum