Answer to Question #222075 in Economics for Namuck Joseph

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

Cobb-Douglas production function properties:

1. If K = 0 or L = 0, then Q = 0, i.e. production is impossible in the absence of at least one factor of production.

2. With an increase in the cost of a factor of production, the value of output increases.

Thus, this is the process of creating a product and service that has a certain value for buyers. Any activity for the production of goods and services is an activity aimed at meeting the needs of individuals or society as a whole. The ratio of effective demand for goods and supply determine the price of a good or service. The production function is a quantitative characteristic of the supply or the volume of production and the value of goods. The production process has a direct impact on the welfare of society as a whole: the higher the degree of satisfaction of individual and social needs and the share of the middle class in the total population, the higher the level of national welfare and development.