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Calculating output elasticity in the given case

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A firm has carefully measured its production function, and thinks that it can be approximated by:

Q = K^0.55*L^0.45, where Q = units of output, K = units of capital, and L = units of labor.

a. What is output elasticity in this case?
b. What sort of returns to scale does the firm face? Explain.

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Solution Summary

The solution determines the output elasticity in the given case.

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a. What is output elasticity in this case?

Output elasticity for some factor is equal to exponent of that factor in case of Cobb-Doughlas ...

Solution provided by:
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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