ECON 212 ASSIGNMENT
1) A biscuit manufacturing firm has the following production function;
Q = 0.4 X 0.6
Where Q= output
X = input
Letting p be price of the output and w the price of input, calculate the maximum profit
1 1
2) Given that Y =0.2 K 4 L 4 C=4000, w 1=Ksh 40, w 2 =ksh 15 where c is cost, w 1 is price of
labour and w 2 is the price of capital. Determine:
a) The cost minimizing input levels
b) The amount of output produced at the cost minimizing input levels.
3) a) Define income and substitution effects
b) With the aid of a well labeled diagram, explain the income and substitution effect of
an increase in price in the case of a Giffen good
1) A biscuit manufacturing firm has the following production function;
Q = 0.4 X 0.6
Where Q= output
X = input
Letting p be price of the output and w the price of input, calculate the maximum profit
1 1
2) Given that Y =0.2 K 4 L 4 C=4000, w 1=Ksh 40, w 2 =ksh 15 where c is cost, w 1 is price of
labour and w 2 is the price of capital. Determine:
a) The cost minimizing input levels
b) The amount of output produced at the cost minimizing input levels.
3) a) Define income and substitution effects
b) With the aid of a well labeled diagram, explain the income and substitution effect of
an increase in price in the case of a Giffen good
