Find production elasticities of demand for labor capital

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Reference no: EM13454726

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

Q = αL^β1K^β2E^β3

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 α, β1, β2, and β3.

Α = 0.01; β1 = 0.5, β2 = 0.4, and β3 = 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?

Reference no: EM13454726

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