Answer to Question #221743 in Macroeconomics for Grace

Question

What are the special properties of the Cobb-Douglas production function, and how might the function be used to calculate the sources of growth?

Answer 1

Solution

The formula of Cobb-Douglas production function is ;

Q(L, K) $= A L^aK^b$ ,

labor and capital are the two special properties of production with the greatest impact on the quantity of output.

The following are the properties

• - Q - quantity of products.
• - L is labor.
• - K is the capital.
• - A is a positive constant.
• - a and b are constants between 0 and 1.

The returns to scale are measured by the sum of exponents of the Cobb-Douglas production function. The exponents of labor and capital in the Cobb-Douglas production function measure output elasticities of Capital and labour, therefore can be used to calculate sources of growth.