Business fixed Investment .o The rental price of K(production firms) MC=MB MB: how many products 1 unit K generates ---MPK MC: how many products 1 unit K costs ---(R/P) MPK-R/P
Business Fixed Investment ❖ The rental price of K (production firms) MC=MB MB: how many products 1 unit K generates --- MPK MC: how many products 1 unit K costs --- (R/P) MPK=R/P
Business fixed Investment 冷 Assumption: MPKi as K↑ K supply R/P MPK SKS
Business Fixed Investment ❖ Assumption: MPK↓ as K ↑ R/P K K supply MPK
Business fixed Investment %o Cobb-Douglas production function Y=AK I-a MPK=a.AKa-lLl-a=aA. ia K
Business Fixed Investment ❖ Cobb-Douglas production function − = 1 Y AK L − − − = = 1 1 1 K L MPK AK L A
Business fixed Investment The cost of K(rental firms) You purchased a car for RMB150,000 and start up your car-rental business. 1 yr later, the same car is sold at rMb100,000. The depreciation rate for the car in the 1 st yr is 30%.The market i-rate is 2% What is the cost of your business this yr?
Business Fixed Investment ❖ The cost of K (rental firms) You purchased a car for RMB150,000 and start up your car-rental business. 1 yr later, the same car is sold at RMB100,000. The depreciation rate for the car in the 1st yr is 30%. The market i-rate is 2%. What is the cost of your business this yr?
Business fixed Investment 1. Interest cost-i·fk 2. Change in P of K-△BiPk-△ABR+6Pk 3. Depreciation ---8 PK △P Cost of k:i·Pk-AP+o·Pk=PR(--+)=P(r+8)
Business Fixed Investment 1. Interest cost --- 2. Change in P of K --- 3. Depreciation --- Cost of K: PK i PK PK PK PK i − + ( + ) = ( + ) − + = − P r P P i P P P P i K K K K K K K PK