Question

Suppose that the price of labor (PL) is $10 and the price of capital (PK) is $20. What is the equation of the isocost line corresponding to a total cost of $100

Answer 1

$100 = $10PL + $20PK

Step-by-step explanation:

Computation for the equation of the isocost line

Using this formula to compute the equation of the isocost line

Total cost=Price of labor (PL)+Price of capital (PK)

Where,

Total cost=$100

Price of labor (PL)=$10

Price of capital (PK)=$20

Now Let plug in the formula to compute the equation of the isocost line

$100 = $10PL + $20PK

Therefore the equation of the isocost line corresponding to a total cost of $100 will be $100 = $10PL + $20PK