If capital increases 1 % and labour will be unchanged, the production will increase 0,583%.
Labour elasticity of production (b2) 0,131%,
Labour elasticity of production– average change in production(in %) associated with a 1%increament in labour, with the capital held constantĬobb – Douglas Production Function Capital elasticity of production (b1) 0,583%. Capital elasticity of production – average change in production (in %) associated with a 1%increament in capital, with the labour held constant. To interpret your result and to make futher analysis of characteristics of production function, antilog for constant term should be calculated.Ĭobb – Douglas Production Function where: Qt – production, in thousand zloty Kt – capital, in million zloty Lt – labour, the number of employees b0, b1, b2– parameters to be estimated Et– error term Log-linearizationĬobb – Douglas Production Function The analysis of production function consists of examinating such characteristics as: Ĭobb – Douglas Production Function Elasticity of production. To obtain the estimators, OLS in matrix notation should be used. These essential inputs are: labour and capital(in agricultural research the area of farming is considered to be the third input).Ĭobb – Douglas Production Function For capital K, labor input L, and constants b0, b1, and b2, the Cobb-Douglas production function is: where: Qt – production Kt – capital Lt – labour b0, b1, b2– parameters of production function Et– error termĬobb – Douglas Production Function Log-linearization simplifies the function,meaning just that taking logs of both sides of a Cobb-Douglass function gives one better separation of the components. is an econometric model that shows relation between scale of production and scale of inputs essential to the production. It is used commonly in both macro and micro examples. Definition: A standard production function which is applied to describe much output two inputs into a production process make. 
Production Function A production function describes a mapping from quantities of inputs to quantities of an output as generated by a production process.
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