Question: A competitive firm uses two inputs, capital () and labour (), to produce one output, (). The price of capital, k , is $1 per

A competitive firm uses two inputs, capital () and labour (), to produce one output, (). The price of capital, k, is $1 per unit and the price of labor, l, is $1 per unit. The firm operates in competitive markets for outputs and inputs, so takes the prices as given. The production function is (,)=30.25 0.25.

Use the method of Lagrange to solve the cost minimization problem and find the labour demand and capital demand functions.

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