We have detail information of Cobb-Douglas Production Function Formula & Example. Labour and Capital are two important part of Cobb-Douglas Production Function.
Cobb-Douglas Production Function Formula & Example
Following is the detail information.
Meaning
The power production function was first proposed by Kunt Wicksell (1851-1926), a leading Swedish economist. Later, it was tested empirically by two American originators, C.W. Cobb (a mathematician) and P.H. Douglas (an economist) in 1928 AD. Therefore, it is known as the Cobb-Douglas production function.
It is a linear homogeneous production function of degree one which takes into account into two inputs, labour and capital, for the entire output of the manufacturing industry.
The Cobb-Douglas production function is given as
The equation tells that output depends directly on L and K. The part of output which cannot be explained by L and K is explained by A which is the residual often called technical change.
Properties of Cobb-Douglas Production Function
Following are the properties of Cobb-Douglas Production Function.
- The Cobb-Douglas production function exhibits constant returns to scale, meaning that increasing all inputs in proportion will result in a proportional increase in output.
- The exponents in the Cobb-Douglas formula represent the elasticities of output with respect to each input. These values indicate how output responds to changes in input levels.
- One of the beauties of this function is log-linear.
- The partial deviation of the Cobb-Douglas production function measures the marginal product of the factor/input.
Efficiency of production
- If A is higher : higher degree of efficiency of production.
- If A is lower : lower degree of efficiency of production.
Other Important Links:
a. Learning Curve: CLICK HERE
b. Production Function Definition Types & Importance: CLICK HERE
c. Isoquant: Meaning and Properties: CLICK HERE
Frequently Asked Question
a. What is Cobb-Douglas Production Function?
= Cobb-Douglas Production Function is an economic model that describes the relationship between inputs and outputs in the production process.
b. What is the formula for the Cobb-Douglas demand function?
= Following is the formula of Cobb Douglas demand function:
c. What is a real life example of the Cobb-Douglas production function?
= Following are the real life example of the Cobb-Douglas Production function.
- The Cobb-Douglas production function can be use to understand the impact of labor and capital inputs on crop yields.
- In health sector, the Cobb-Douglas production function to evaluate the relationship between labor, capital, and healthcare outcomes.
d. What is the importance of Cobb-Douglas production function in agriculture?
= In agriculture, the Cobb-Douglas production function can be use to understand the impact of labor and capital inputs on crop yields.
