General factor demand function

In microeconomics , the term general factor demand function describes a function that specifies the maximum profitable factor input quantities for all combinations of factor prices and goods prices that can be realized with a given technology. One speaks of the special factor demand function when all but one factor prices are constant (fixed).

Mathematical consideration

The solution to the profit maximization problem

${\displaystyle \underbrace {max} _{(r_{1},r_{2})}\ \underbrace {pg(r_{1},r_{2})} _{Erloes}-\underbrace {(q_{1}r_{1}+q_{2}r_{2}+F)} _{Kosten}\!\,}$

With

• ${\displaystyle r_{1},r_{2}}$ = variable factor input amounts
• ${\displaystyle g(r_{1},r_{2})}$ = Production function
• ${\displaystyle q_{1},q_{2}}$ = variable factor prices
• ${\displaystyle F}$ = Fixed costs

can be represented as a function if clear solutions are available . This function is known as the general factor demand function. ${\displaystyle r_{i}=r_{i}(q_{1},q_{2},p)\!\,}$

literature

• Jörg Beutel: Microeconomics , Oldenbourg 2006, ISBN 3486581163