IDEAS home Printed from https://ideas.repec.org/a/iih/journl/v2y2008i2p148-160.html
   My bibliography  Save this article

Cost Minimization of a Competitive Firm

Author

Listed:
  • Pahlaj Moolio
  • Jamal Nazrul Islam

    () (University of Chittagong, Chittagong, Bangladesh.
    Indus Institute of Higher Education (IIHE) karachi Pakistan,)

Abstract

One of the economists’ missions is to predict the behavioral responses of consumers or firms on the assumption that optimizing continues. Once this capability is developed, economists try to manage “today” to optimize future economic return of the inputs. Techniques to predict future performance vary from an educated guess based on an appropriate analogy to very complex analytical and numerical calculations and approximations. However, what they all have in common is that they analyze performance in past to say something to obtain constrained optimal output in future. Considering Lagrange multiplier technique applied to a firm’s cost minimization problem subject to production function as an output constraint, an attempt has been made in this paper to apply necessary and sufficient conditions for optimal values. We gave interpretation of Lagrange multiplier and showed that its value is positive. Examining the behavior of the firm; that is, if the cost of a particular input increases, the firm needs to consider decreasing level of that particular input; at the same time, there is no effect on the level of other inputs; also that when the demand of product increases, the firm should consider increasing its level of inputs: capital, labour and other inputs, have been derived.

Suggested Citation

  • Pahlaj Moolio & Jamal Nazrul Islam, 2008. "Cost Minimization of a Competitive Firm," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 2(2), pages 148-160, December.
  • Handle: RePEc:iih:journl:v:2:y:2008:i:2:p:148-160
    as

    Download full text from publisher

    File URL: http://indus.edu.pk/RePEc/iih/journl/6-CostMinimizationofaCompetitiveFirm-PahlajMoolioandJamalNazrulIslam.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jamal Nazrul Islam & Haradhan Kumar Mohajan & Pahlaj Moolio, 2010. "Utility Maximization Subject to Multiple Constraints," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 4(1), pages 15-29, December.
    2. repec:ksb:journl:v:4:y:2011:i:1:p:116-128 is not listed on IDEAS
    3. Jamal NazrulIslam & Haradhan Kumar Mohajan & Pahlaj Moolio, 2011. "Output Maximization Subject to a Nonlinear Constraint," KASBIT Business Journals, Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 4, pages 116-128, December.
    4. Pahlaj Moolio & Jamal Nazrul Islam & Haradhan Kumar Mohajan, 2009. "Output Maximization of an Agency," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 3(1), pages 39-51, June.

    More about this item

    Keywords

    Lagrange Multiplier; Optimization; Cost Minimization; Cobb-Douglas Production Function.;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iih:journl:v:2:y:2008:i:2:p:148-160. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Faraz Ahmed). General contact details of provider: http://edirc.repec.org/data/fbihpkk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.