An entrepreneur uses two distinct production processes to produced two distinct goods, Q and Q. The...
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An entrepreneur uses two distinct production processes to produced two distinct goods, Q and Q. The production function for each good is CES, and the entrepreneur obeys the equilibrium condition for each. Assume that Q has a higher elasticity of substitution and a lower value for the parameter a than Q. Determine the input price ratio at which the input use ratio would be the same for both goods. Which good would have the higher input ratio if the input price ratio were lower? Which would have the higher use ratio if the price ratio were higher? An entrepreneur uses two distinct production processes to produced two distinct goods, Q and Q. The production function for each good is CES, and the entrepreneur obeys the equilibrium condition for each. Assume that Q has a higher elasticity of substitution and a lower value for the parameter a than Q. Determine the input price ratio at which the input use ratio would be the same for both goods. Which good would have the higher input ratio if the input price ratio were lower? Which would have the higher use ratio if the price ratio were higher?
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