7. Find the elasticity of scale and the elasticity of substitution for the CES production function f(z1, 72) = (x° + 2)'e, where 0 +p< 1.

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7. Find the elasticity of scale and the elasticity of substitution for the CES production
function
f(21, #2) = (z{ + 2),
where 0 + p< 1.
8. Consider the production of health as as function of two inputs, medicine as self care.
Suppose that a new medicine product (may be a new vaccine, or a better treatment)
increases the marginal product of medicine, leaving intact the marginal product of
self care, for a fixed bundle of medicine and self care. Illustrate the implications in a
map of isoquants.
Transcribed Image Text:7. Find the elasticity of scale and the elasticity of substitution for the CES production function f(21, #2) = (z{ + 2), where 0 + p< 1. 8. Consider the production of health as as function of two inputs, medicine as self care. Suppose that a new medicine product (may be a new vaccine, or a better treatment) increases the marginal product of medicine, leaving intact the marginal product of self care, for a fixed bundle of medicine and self care. Illustrate the implications in a map of isoquants.
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