Assume that we have a Cobb-Douglas type aggregate production function in the form: Y=W.Kr.L1-r where : W=technology and r is standard share parameter of Cobb-Douglas production function. a. Find Marginal Rate of Technical Substitution (MRTS) between K and L. b. Why does (or does not) technology affects MRTS? Explain. c. Find output per effective labor; capital per effective labor (y=Y/WL and k= K/WL ). d. Find elasticity of substitution between K and L. Why does (or does not) the result different from previous question (Question-1) (Y=Ka.Lb) ?
Assume that we have a Cobb-Douglas type aggregate production function in the form: Y=W.Kr.L1-r where : W=technology and r is standard share parameter of Cobb-Douglas production function. a. Find Marginal Rate of Technical Substitution (MRTS) between K and L. b. Why does (or does not) technology affects MRTS? Explain. c. Find output per effective labor; capital per effective labor (y=Y/WL and k= K/WL ). d. Find elasticity of substitution between K and L. Why does (or does not) the result different from previous question (Question-1) (Y=Ka.Lb) ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume that we have a Cobb-Douglas type aggregate production function in the form: Y=W.Kr.L1-r
where : W=technology and r is standard share parameter of Cobb-Douglas production function.
|
a. |
Find |
|
b. |
Why does (or does not) technology affects MRTS? Explain. |
|
c. |
Find output per effective labor; capital per effective labor (y=Y/WL and k= K/WL ). |
|
d. |
Find elasticity of substitution between K and L. Why does (or does not) the result different from previous question (Question-1) (Y=Ka.Lb) ? |
Transcribed Image Text:2.
Assume that we have a Cobb-Douglas type aggregate production function in the form:
Y = WK" L1-r
where : W=technology and r is standard share parameter of Cobb-Douglas production function.
а.
Find Marginal Rate of Technical Substitution (MRTS) between K and L.
b.
Why does (or does not) technology affects MRTS? Explain.
Find output per effective labor; capital per effective labor (y=Y/WL and
с.
k= K/WL ).
Find elasticity of substitution between K and L. Why does (or does not) the
d.
result different from the previous question (Question-1)?
Transcribed Image Text:1.
Assume that we have a Cobb-Douglas type aggregate production function in the form:
Y = KªL®
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