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Hello sir im having a little bit of difficulty with this question num 111. I’ve already got the shadow price for labour but how to get the direct labour hours??
If they get more labour then it will be used to make more of Y (because they are already making 10,000 of X which is the maximum demand).
Currently they are making 2,500 of Y. The most they can sell of Y is 12,000 units so if they have more labour they could make and sell an extra 9,500 units. At 4 hours per unit this would take an extra 38,000 hours. Once they had got 38,000 extra hours there would be no point in buying any more hours because even though they could make more units they would not be able to sell them.
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