Please can I get some explanations on this question. Especially when ln was added to find the elasticity. What is the elasticity of substitution, o, of the CES production function below?dPq = (alº + bK°)Assume d and p are positive constants and 0 Solving foras a function of the absolute value of the marginal rate of technical substitution, MRTS,1(MRTS) )K(Properly format your expression using the tools in the palette.)%DLaTaking the log of both sides,1InIn+ In|MRTS|Substituting this in for Inand taking the derivative,din(K/L)O =din MRTS|1Ina+ In MRTS|din MRTS|11 -

Elasticity is defined as the degree or measure of the change in a variable due to fluctuation in…

Answered: What is the elasticity of substitution,…

What is the elasticity of substitution, o, of the CES production function below? q = (alº + bk°) P Assume d and p are positive constants and 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Is the market demand for smartphones elastic or inelastic? Please provide at least 1 academic or…

A: The price elasticity is the measures of responsiveness of percentage change in quantity demanded…

Q: Quantity demanded is a function of price and income: Q = 50 + 50M - 10P, where M is income and P is…

A: Income elasticity of demand is the measure of responsiveness of quantity demand due to the change in…

Q: Deborah is a stay-at-home parent who lives in San Francisco and does some consulting work for extra…

A: Given information: Initial wage rate = $20 per hour Final wage rate = $35 per hour Working hours at…

Q: Identify each factor influencing elasticity and give a specificexample of how it affects the degree…

A: Answer: There are mainly four factors that affect the elasticity of demand which are as follows:…

Q: Calculate the elasticity between and between points G and H shown in the figure below:

A: Elasticity is the ratio of percentage change in quantity demanded and percentage change in prices.

Q: The elasticity of labor supply among females is -0.12. The interpretation of this estimate is what?

A: Elasticity is a measure of a variable's sensitivity to changes in another variable; most frequently,…

Q: The elasticity of demand for physician visits was determined to be -0.2. The president of the local…

A: Demand elasticity gauges the variation in amount demanded that results from price variations between…

Q: You have a charger of your phone at home and you are relativley poor. When your income decreases…

A: Elasticity of demand refers to the responsiveness on part of the consumers toward the change in…

Q: Own price elasticity of demand for vibranium has been estimated at 0.8. As a result a mining…

A: Price elasticity of demand: - Price elasticity of demand measures the responsiveness of change in…

Q: When average incomes of its buyers were $60,000 per year, a certain cereal sold 1.2 million units.…

A: Elasticity is an economic tool that measures the degree of sensitivity of one variable to another.…

Q: Suppose in Ventura, when the price of new furniture goes up by 20% and the quantity demanded of new…

A: elasticity refers to the degree of responsiveness of one economic variable to a change in another.

Q: Elasticity is expressed in both positive and negative values True False

A: Elasticity is a measure of the responsiveness of one economic variable to a change in another…

Q: > Why might your initial elasticity (PED) and (PES) calculations be unreliable?

A: The initial elasticity (PED) and (PES) calculations are unreliable.

Q: 3. Suppose that the price of education increases. Does the total expenditure for healthcare rise or…

A: Elasticity of demand measures the responsiveness of quantity demanded changes as a result of price…

Q: The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units.…

A: Initial price, P = $8 Final price, P1 = $12 Initial quantity, Q = 110 Final quantity, Q1 = 90

Q: Find the point (p,q) Where elasticity = 1

A: Elasticity is defined as the responsiveness of the quantity demanded to the change in…

Q: Calculate the price elasticity of demand for healthcare in Japan using on data from year 2000.…

A: Price elasticity of demand measures the responsiveness of change in quantity demanded due to change…

Q: Suppose we know that the price elasticity of demand for sandals is -1.4. A shoe stores normally…

A: Elasticities affect monetary and fiscal frameworks, allowing policymakers to adjust them to regulate…

Q: Kaert00) etate that he US Tbaco Settement between major tobacco companies and 46 states ced the…

A: Price elasticity of demand show the change in demand due to change in price here we calculate the…

Q: In calculating elasticity, we use the midpoint method for calculating the percentage change because…

A: Elasticity is the measurement change in quantity demanded or supplied with the change of prices for…

Q: Using the endpoint method, computing the percent change in price from point A to B, computes the…

A: In economics, the end-point method of computing price elasticity is widely used to compute the…

Q: In class and in recordings or notes on Canvas, we discussed the Lerner index. Most of the…

A: The Lerner index is a measure of market power in imperfectly competitive markets and is defined as:…

Q: Suppose in a particular industry 120 people are employed at a wage rate of $4 per hour. Further,…

A: Ans. Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Wage Rate) Percentage…

Q: Elasticity is the ratio of one percentage change to another percentage change. Why would we use…

A: Meaning of Price Elasticity of Demand: The price elasticity of demand refers to the situation…

Q: a. Referring to the above data, discuss whether gasoline cars and electricity are substitutes or…

A: Since you have posted a question with multiple sub parts, we will solve first three subparts for…

Q: Distinguish amongst the main categories of elasticity. Include in your answer the provision of…

A: Studying changes in quantity sought or provided as a result of determinant changes uses the idea of…

Q: For the demand function = 200 − 3? , calculate the arc price elasticity for a change in price from ?…

A: Answer- Need to find- For the demand function = 200 − 3P, calculate the arc price elasticity for a…

Q: Newspapers reported that median income Increased by 4.2% and at the same time visits to the museum…

A: Answer is given below

Q: Ру1-6 Ру2-24 Qdx1=7 • Qdx2=3

A: The degree of responsiveness of a commodity's amount demanded in reaction to a change in the price…

Q: The consumer demand equation for tissues is given by q = (110-p)2, where p is the price per case of…

A: Total revenue is the product of price and quantity. Marginal revenue is the derivative of total…

Q: The cross price elasticity between two goods is +0.9, the initial prices of the two goods are P1=$2…

A: The cross-price elasticity of demand (XEd) depicts the responsiveness of the quantity demanded (Q)…

Q: smoking to cancer plans to raise the excise tax in cigarettes so the price rises by 10 percent. The…

A: Price elasticity of demand is in turn being defined as the % change in quantity which is being…

Question

100%

Please can I get some explanations on this question. Especially when ln was added to find the elasticity.

What is the elasticity of substitution, o, of the CES production function below?
d
P
q = (alº + bK°)
Assume d and p are positive constants and 0<a<1 and 0<b<1. Also assume capital is measured on the vertical axis and labor on the
horizontal axis.
The elasticity of substitution is the percentage change in the capital-labor ratio divided by the percentage change in the MRTS:
d(K/L)
K/L
d(K/L) MRTS
%D
DMRTS
DMRTS K/L
MRTS
The elasticity of substitution can be written as a logarithmic derivative:
din(K/L)
din|MRTS| '
which is possible because din(K/L) = d(K/L)/ (K/L) and din|MRTS| = d|MRTS|/MRTS.
The marginal rate of technical substitution (MRTS) as a function of Labor (L) and capital (K) is
p-1
a
MRTS =
E. (Properly format your expression using the tools in the palette. Hover over tools to see keyboard

Solving for
as a function of the absolute value of the marginal rate of technical substitution, MRTS,
1
(MRTS) )
K
(Properly format your expression using the tools in the palette.)
%D
L
a
Taking the log of both sides,
1
In
In
+ In|MRTS|
Substituting this in for In
and taking the derivative,
din(K/L)
O =
din MRTS|
1
In
a
+ In MRTS|
din MRTS|
1
1 -

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75. Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour. Based on this information, calculate the percentage change in the employment of low skilled workers. Use the midpoint formula?
When incomes in a given country rose by 14%, demand for a certain type of pasta fell by 8%. Calculate the appropriate type of elasticity, using the methodology in the PowerPoints. You will interpret your answer in the next question. Enter only numbers, a decimal point, and/or a negative sign as needed. Round your answer to two decimal places as necessary; if you round on intermediate steps, use four places.
Calculate change in price uf elasticity of is-2 and percentage change in Quantity demanded is 5%
Suppose you're trying to compare the year-to-year performance of one of your regional salespeople over a period during which income grew by 3%. If demand for your products has an income elasticity of 2, how would you measure the salesperson's performance?
Demand Price Quantity Total Revenue Elasticity 5.50 50 Question 5 Question 14 5.00 75 Question 6 Question 15 4.50 100 Question 7 Question 16 4.00 125 Question 8 Question 17 3.50 150 Question 9 Question 18 3.00 175 Question 10 Question 19 2.50 200 Question 11 Question 20 2.00 225 Question 12 Question 21 1.50 250 Question 13
It was observed in a particular supermarket that after the price of good X dropped from 20 pesos to 17.50 pesos, the weekly demand for the said products increased from 150 units to 220 units. Solve for the Price Elasticity of Demand, then identify whether the consumer demand for good X is elastic, inelastic, or unit elastic.
Define unit-elastic ?
Another word for elasticity is
Could you please help me understand why the correct answer is what it is for each of these true/fase statments? I have tried this problem a couple times and I keep getting it incorrect. If you could show you you used your calculation solution to determine elasticity, that would be very helpful. Thanks!
How is elasticity related to logarithms?
Why might your estimate of elasticity be inaccurate?
Suppose that as the price of Y falls from $3.00 to $2.80, the quantity of Y demanded increases from 110 to 120. Find the value of price elasticity of demand (Using Arc method). For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).