Assume the following production function (photo aswell) q = [0.3k^(-1)+ 0.7l ^(-1)] ^(-1) a) Determine the rate of technical substitution, RTS. b) Determine the elasticity of substitution. c) What would happen to the capital intensity if the relative factor price w/v were to increase by 10%?
Assume the following production function (photo aswell) q = [0.3k^(-1)+ 0.7l ^(-1)] ^(-1) a) Determine the rate of technical substitution, RTS. b) Determine the elasticity of substitution. c) What would happen to the capital intensity if the relative factor price w/v were to increase by 10%?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume the following production function (photo aswell)
q = [0.3k^(-1)+ 0.7l ^(-1)] ^(-1)
a) Determine the rate of technical substitution, RTS.
b) Determine the elasticity of substitution.
c) What would happen to the capital intensity if the relative factor
d) If the elasticity of substitution were higher than what you calculated in (b), would the effect of a 10% increase in the relative factor price w/v on the capital intensity be higher or lower than what you calculated in (c)? Explain your reasoning.
![q = [0.3k-1+ 0.71-1]-1](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbdbdfd3c-8436-4538-af55-7871b6c2acea%2Fb3f0a019-244d-4f5e-9fdd-e5952dbbfecf%2Ffzoy8f7_processed.png&w=3840&q=75)
Transcribed Image Text:q = [0.3k-1+ 0.71-1]-1
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