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Cobb-Douglas Production Function

Hi,

I am fairly new to economics with only a basic understand of the topic and because of this I am struggling to answer (and understand the explanation for the answer) a question about the Cobb Douglas production function.

Q. Under what conditions does a Cobb-Douglas production function (q=AL^(alpha)K^(beta)) exhibit decreasing, constant or increasing returns to scale?

Alongside this, can someone please breakdown for me how and why '(alpha) + (beta) > 1' would indicate increasing returns. All answers online and in the textbook have been out of my depth in terms of understanding.

Solution Preview

If the sum of the inputs' exponents = 1 then constant returns to scale.
If the sum of the inputs' exponents < 1 then decreasing returns to scale.
If the sum of the inputs' exponents > 1 then increasing returns to scale.

In the normal capital and labor equation as you stated, (alpha) and (beta) are the exponents. So in this case you would add alpha and beta and see which of the three cases above you ...

Solution Summary

The expert examines Cobb-Douglas production functions.

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