There is given. a CES production function of a form: f(x 1 , X 2 ) =
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There is given. a CES production function of a form: f(x1, X2) =
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(ax + ax2), 0, a > 0, i = 1, 2, y (-; 0) U (0; 1). Let us assume that a variable u = 12 describes a quantity of the second production factor per one unit of the first production factor. 1. Justify that: (a) an elasticity of marginal rate of substitution of the first production factor by the second production factor is constant and equal to E2 (u) = 1-y, (b) an elasticity of marginal rate of substitution of the second production factor by the first production factor is constant and equal to Eo1 (u) = y - 1, 2. Determine a range of variability of constant elasticities E012 (u) and Eo21 (u) of marginal rates of substitution. 3. Determine an elasticity of production with respect to scale of inputs and justify that it is equal to a degree Ex(x) = 0 of positive homogeneity of the production function.
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Related Book For
Microeconomics Static And Dynamic Analysis Springer Texts In Business And Economics
ISBN: 9783031105531
1st Edition
Authors: Krzysztof Malaga, Karolina Sobczak
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