I need some help again :P Hopefully someone can answer my questions this time ^^
-- Explain the concept of scale elasticity.
I know the basic definition is : % Change in output / % change in input
But how would I expand upon this?
-- Show how Cobb-Douglas function can be used to provide information abouts a firms "returns to scale"
I understand how we get from: Q = (L^a) * (K^b) to dQ/dL = [aL^(a-1)] * (K^b)
But how do I convert it to a+b is =,> or < 1 to gain the scale elasticity. I think it is something to do with the Elasticity of L and K being MPx / APl = elasticity of output.
Not sure tbh, lots of rep availible ^^
Thanks in advance
Scale Elasticity Watch
- Thread Starter
- 13-11-2008 02:35
- PS Reviewer
- 13-11-2008 15:20