a) A fall in the price of an input induces a profit maximizing firm to experienc

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a) A fall in the price of an input induces a profit maximizing firm to experience both substitution and output effects that cause it to hire more of that input. Explain how the profit-maximizing assumption is used in explaining the direction of each of these effects. Did you have to use the assumption that the input is not inferior in your analysis? Do you think a similar statement can be made about inferior inputs? b) Suppose the price of an input used by firms with fixed-proportions production functions were to fall. Why would such a change not cause any substitution effects for these firms

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plz read dis, i hope it will b helpfull to you !! http://oep.oxfordjournals.org/content/15/2/130.extract

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