Answer to Question #222099 in Macroeconomics for Benjamin Bansah

Question

how Cobb-Douglas can the function be used to calculate the sources of growth

Answer 1

The Cobb- Douglas production function measures returns to scale by the sum of its exponents:

• If $\alpha+\beta=1$ , returns to scale are constant.
• If $\alpha+\beta>1,$ returns to scale are increasing.
• If $\alpha+\beta<1$, returns to scale are decreasing.

The exponents of labor and capital in the Cobb-Douglas production function give a measure of output elasticities of labor and capital respectively.