Analyzing given production function - Cobb Douglas Equation
Assume Firm Y's production function is given by the following Cobb Douglas equation
Q = 0.5 x L^0.6 x K^0.5
where L denotes labor and K denotes capital.
The production function exhibits (increasing/decreasing/constant) returns to scale.
1. If labor hours increase by 10%, what is the percentage change in output (provide a numerical answer)?
2. If capital decreases by 10%, what is the percentage change in output (provide a numerical answer)?
3. If the number of labor hours increases by 10% and the number of hours of capital used decreases by 10%, what is the percentage change in output?