Answer to Question #314574 in Microeconomics for halwest

Question

Explain the two characteristics of the Cobb Douglas production

function that make it particularly useful to macroeconomists

Answer 1

Explain the two characteristics of the Cobb Douglas production function that make it particularly useful to macroeconomists;

Diminishing marginal product and distribution of national income whereby the law of diminishing marginal productivity states that when an advantage is gained in a factor of production, the productivity gained from each subsequent unit produced will only increase marginally from one unit to the next.

On the other hand, National income is distributed among the various factors of production like land, labor, capital and enterprise. From national income the rent of land, wages of laborer's, interest on capital and risk part of money to entrepreneur will be deducted and the balance left will be net profit which will be distributed.