Lecture 11 - november 26: homogenous production function. This is a homogenous function of degree n. Now we call the euler theorem for homogenous functions of degree 1. Lecture 11 - november 26: cost minimization. At a/2 we use half k and half of l, we produce half of a. At b, we produce as much as at a. At b/2, we use half of k and half of l compared to b. Z is vector summation of b/2 and a/2. At z we produce as much as at a or b. Because the cost of z is higher than a. Message: there is only one technique that it is cost minimizing. If you employ two techniques it is less e cient. Main message: in both industries, techniques are chosen so as to minimizing costs. At the point of cost minimizations (x1, x2) A movement up or right doesn"t make a di erence in the total cost: distribution shares.
