A translog cost function with constant returns to scale can be written as 1 Inc =...

 

Transcribed Image Text:

A translog cost function with constant returns to scale can be written as 1 Inc = Ina,+Ea, Inw, +ß, In w, In w, Σα 2 where e shows the minimum costs required for producing the output level y given the per unit input prices w for the n inputs. For the questions below, assume that we have two inputs and symmetric price effects, i.e., B, = B b) Derive the translog (output conditional) input demand function for input 1. Hint: Use logarithmic differentiation and find the input demand function expressed as a cost share. A translog cost function with constant returns to scale can be written as 1 Inc = Ina,+Ea, Inw, +ß, In w, In w, Σα 2 where e shows the minimum costs required for producing the output level y given the per unit input prices w for the n inputs. For the questions below, assume that we have two inputs and symmetric price effects, i.e., B, = B b) Derive the translog (output conditional) input demand function for input 1. Hint: Use logarithmic differentiation and find the input demand function expressed as a cost share.

Answer rating: 100% (QA)

Differentiating the translog cost function with respect to input 1 we get dInC dIna a dInw EX B dInw ... View the full answer