Part 1. Supply Curves

Cost minimization Example

Suppose a firm has production function $Q=K^{1/4}L^{1/4}$. Suppose the wage rate is $w$ and the capital rental rate is $r$. Set up the lagrangian for the cost minimization problem and solve for the cost function.

Try on your own before watching the video.

Building Market Supply

Suppose there are two types of firm. There are 100 firms of "type 1", which has cost function $c_1(q)=2q^2$. There are also 20 firms of "type 2" which have cost function $c_2(q)=10+\frac{1}{2}q^2 + q$.

First, find the individual supply function of each firm.

Second, find market supply.

Part 2. Demand Curves

Elasticity Example

What is the price elasticity of demand for the demand curve $Q=100-p$ at the following prices:

  • $p=90$
  • $p=50$
  • $p=1$

Try this on your own before watching the following video for a walk-through.

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