explain cobb douglas production function

Constant Elasticity of Substitution Production Function and 4. Linear Homogeneous Production Function, 2.

The Cobb–Douglas function can also be extended to include three or more arguments. ADVERTISEMENTS: Four most important production functions are: 1. The production function is the central part of production theory and as such there is a theoretical interest in its estimates. Variable Elasticity Substitution Production Function. Linear Homogeneous Production Function, 2. With this production function, a cost-minimizing firm will spend a proportion of its total costs on capital and a proportion on labour. With this utility function a utility-maximizing consumer will spend a proportion α of their budget on good X and a proportion β on good Y. Douglas studied the relationship of inputs and outputs and formed an empirical production function, popularly known as Cobb-Douglas production. ADVERTISEMENTS: Four most important production functions are: 1. When the Cobb–Douglas function is applied as a utility function the inputs, K and L, are replaced by the consumption levels of two types of good, say, X and Y. With this production function, a cost-minimizing firm will spend a proportion α of its total costs on capital and a proportion β on labour. The Cobb–Douglas production function has also been applied at the level of the individual firm. The differences among them lie in the relationship between the variables: output, capital, and labor. If α + β = 1 this function has constant returns to scale: if K and L are each multiplied by any positive constant λ then Y will also be multiplied by λ. There are three main types of production functions: linear, Cobb-Douglas and Leontief. Where A, α, and β are positive constants. The Cobb–Douglas production function is then given by A Cobb-Douglas production function models the relationship between production output and production inputs (factors). Denote aggregate output by Y, the input of capital by K, and the input of labour by L. For instance, with 1.5, the capital share rises from 28 to 36 if the wealthincome ratio jumps from 2. A functional form, named after its originators, that is widely used in both theoretical economics and applied economics as both a production function and a utility function. With large changes in, one can obtain substantial movements in the capital share with a production function that is only moderately more flexible than the standard CobbDouglas function.

Explain cobb douglas production function