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Uploaded on Nov 19, 2009
In this video, I demonstrate a mathematical method for deriving a firm's cost function from a production function. I do so by example, using the example of a constant returns to scale Cobb-Douglas production function. This video assumes familiarity with calculus. If you are unfamiliar with calculus, Lecture 17 has all of the graphical intuition that is in this video.
In the process, I demonstrate how to use the method of Lagrange multipliers. My use of the Lagrangian is operational. That is, I refrain from giving all of the technical theoretical details that justify using a Lagrangian method. In this video, I merely demonstrate how to use it to solve an expenditure minimization problem.
For a list of videos and links to all of the microeconomics videos on this channel (organized by topic), check out the Intromediate Microeconomics video web page: