If the number of trucks k decreases by 10 next year how, Ask an Expert

Economics

1. The following Cobb-Douglas production function is used to describe the output generated by a local government maintenance agency.

Q = Î±LÎ²1KÎ²2EÎ²3

Where L represents number of worker hours, K represents number of trucks used, and E represents energy used. Statistical estimated generated the following values for Î±, Î²1, Î²2, and Î²3.

Î‘ = 0.01; Î²1 = 0.5, Î²2 = 0.4, and Î²3 = 0.2

a. What are the production elasticities of demand for labor, capital (trucks) and energy?

b. If worker hours (labor) are increased by 10% next year, how much will output (Q) increase?

c. If the number of trucks (K) decreases by 10% next year, how much will output (Q) decrease?

d. What type of returns to scale is consistent with the above production function?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9445696

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