Question 16 of 39
Q.How is Cobb - Douglas Production function expressed ?
Tamil Nadu DgeTamil Nadu HSC First Year (DGE) Commerce Board 2020Subjective· 3mImportance★★★★★
41% · 16/39 Questions
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Start your 14-day free trial to unlock the full solution →The Cobb-Douglas production function is written Q = A L^a K^b, relating output to labour and capital through a technology constant A and the exponents a and b (their output elasticities); a + b indicates returns to scale.
The function. Proposed by Charles W. Cobb and Paul H. Douglas (1928), the Cobb-Douglas production function is expressed as:
Q = A L^a K^b
where:
- Q = total output,
- L = quantity of labour employed,
- K = quantity of capital employed,
- A = a positive constant representing the state of technology/efficiency,
- a = output elasticity of labour, and b = output elasticity of capital (both positive, usually less than 1).
Returns to scale. The sum of the exponents (a + b) shows the nature of returns to scale:
- if a + b = 1, there are constant returns to scale; …
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