Asked by Veronica Lovtsova on Jun 15, 2024
Verified
For each of the following production functions, comment on the ability to substitute capital for labor.
a.Q K L.
b.Q K0.5L0.5.
c.Q min(K, L).
Capital
Financial assets or the financial value of assets, such as funds held in deposit accounts and/or physical factors of production.
Production Functions
A mathematical relationship that describes how input factors such as labor and capital are converted into output or goods and services.
Substitute
A good or service that can be used in place of another good or service, often because they share similar characteristics or fulfill similar needs.
- Assess the implications of different production functions on the ability to substitute one factor of production for another.
- Evaluate the impact of varying input proportions on output through the concept of marginal rate of substitution.
Verified Answer
CR
Christian RuttleyJun 18, 2024
Final Answer :
a.Perfect substitutability.
b.substitutability.
c.No substitutability.
b.substitutability.
c.No substitutability.
Learning Objectives
- Assess the implications of different production functions on the ability to substitute one factor of production for another.
- Evaluate the impact of varying input proportions on output through the concept of marginal rate of substitution.