3.31 The output elasticity of demand for input x; is defined as y (w, y) =...

 

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3.31 The output elasticity of demand for input x; is defined as y (w, y) = (ax(w, y)/ay) (y/x;(w, y)). (a) Show that iy (w, y) = (y)eiy (w, 1) when the production function is homothetic. (b) Show that y = 1, for i = 1,..., n, when the production function has constant returns to scale. 3.31 The output elasticity of demand for input x; is defined as y (w, y) = (ax(w, y)/ay) (y/x;(w, y)). (a) Show that iy (w, y) = (y)eiy (w, 1) when the production function is homothetic. (b) Show that y = 1, for i = 1,..., n, when the production function has constant returns to scale.

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a If the production function is homothetic it can be ... View the full answer