a
To find:Labor, fuel, capital input production elasticities.
a
Answer to Problem 9E
Labor production elasticity = 0.45
Capital production elasticity= 0.30
Fuel production elasticity= 0.20
Explanation of Solution
Given Information:
The production function is given as:
Taking log both the sides:
Introduction:
Labor input production elasticity is a measurement of percentage change in output due to percentage change in labor. It shows productivity of labor.
Fuel input production elasticity is a measurement of percentage change in output due to percentage change in fuel. It shows productivity of fuel.
Capital input production elasticity is a measurement of percentage change in output due to percentage change in capital. It shows productivity of capital.
b)
To ascertain:Percentage change in output due to change in labor input.
b)
Answer to Problem 9E
Percentage change in output due to change in labor input is 0.90.
Explanation of Solution
Given Information:
Increase in labor input = 2%
Percentage change in
It is given that percentage change in labor is 2 percentage. Hence,
Introduction:
Labor input production elasticity is a measurement of percentage change in output due to percentage change in labor. It shows productivity of labor.
c)
To find:Percentage change in output due to change in capital input.
c)
Answer to Problem 9E
Percentage change in output due to change in capital input is -0.90.
Explanation of Solution
Given Information:
Decrease in capital = 3%
Percentage Change in
It is given that percentage change in capital is -3 percentage. Hence,
Introduction:
Capital input production elasticity is a measurement of percentage change in output due to percentage change in capital. It shows productivity of capital.
d)
To know:Types of returns to scale.
d)
Answer to Problem 9E
It is decreasing returns to scale.
Explanation of Solution
Given Information:
This represents decreasing returns to scale.
There are decreasing returns to scale.
Introduction:
Returns to scale is the output growth due to input change. It measures change in output due to change in all factor inputs. It is a long run phenomenon.
e)
To ascertain:Problems due to time series data for estimating parameters of model.
e)
Explanation of Solution
Certain problems due to time series data are:
- Variables are interdependent on each other which leads to incomplete analysis of single variable.
- Time series data are not used for prolonged time duration. Analysis fails after a certain period of time.
- Labor, capital or fuel input may be efficient at certain time period but may become inefficient after certain period after an optimal usage of any of the inputs.
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Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
