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    nature of returns of scale

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    Consider the production function Q=100L^.5K^.4. Suppose L=1 and K=1 so that Q=100.

    If L is increased 1 percent, that is to L=1.01 with the capital unchanged, what is the resulting percentage increase in output?

    Describe the nature of returns of scale for this production function.

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    https://brainmass.com/economics/production-function/nature-of-returns-of-scale-284869

    Solution Preview

    Q=100L^0.5K^0.4 L=1, K=1 Q=1
    Now if L=1.01
    we have Q=100*1.01^0.5*1^0.4=100.499

    To check return ...

    Solution Summary

    The nature of returns of scale is explicated.

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