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# production function with perfect substitutes

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A production function has 2 inputs - labor and capital. Both are perfect substitutes. Existing technology permits 1 machine to do the work of 3 workers. The firm wants to produce 100 units of output. Suppose the price of capital is \$700 per machine per week. What combination of inputs will the firm use if each worker is paid \$300 per week? What combination of inputs will the firm use if each worker is paid \$225 per week? What is the elasticity of labor demand as the wage falls from \$300 to \$225?

https://brainmass.com/economics/production/production-function-perfect-substitutes-157140

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Because labor and capital are perfect substitutes, the firm will use the cheaper input. Because three workers would cost \$900, but one machine only \$700, the firm will not ...

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The solution discusses production function with perfect substitutes.

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