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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?

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9202714

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