Also to know, what type of returns Cobb Douglas production function indicates? The Cobb-Douglas production function represents the relationship between two or more inputs – typically physical capital and labor – and the number of outputs that can be produced. This is the dening characteristic of constant returns to scale. The Cobb-Douglas function can be either increasing, decreasing or constant. At first the two economists have applied their principle to. This problem has been solved Youll get a detailed solution from a subject matter expert that helps you learn core concepts. So if we scale both inputs by a common factor, the effect is to scale the output by that same factor. Refer to the definitions of returns to scale in the text and in the lecture slides 1. This is similar to linear homogeneous production function showing constant returns to scale. In this way, how do you know if a production function has constant returns to scale?The easiest way to find out if a production function has increasing, decreasing, or constant returns to scale is to multiply each input in the function with a positive constant, (t > 0), and then see if the whole production function is multiplied with a number that is higher, lower, or equal to that constant.Furthermore, what is the role of constant returns to scale? A production function has constant returns to scale if an equal percentage increase in all factors of production causes an increase in output of the same percentage. Prove that if the more general form of the Cobb-Douglas production function Y AKI exhibits constant returns to scale then B 1-a.
COBB DOUGLAS CONSTANT RETURNS TO SCALE FULL
A regular example of constant returns to scale is the commonly used Cobb-Douglas Production Function (CDPF).Click to see full answer.
When the output increases exactly in proportion to an increase in all the inputs or factors of production, it is called constant returns to scale.
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