Let us consider the following Cobb-Douglas production function P, A, LPK2e", Where P = level of output, L= quantity of labor, K = quantity of capital, and Ao is constant. B, and B2 are two parameters. Y,= In(P), B.- In(A), X₁, In(L), X2i = In(K₁), y. (Y-Y) X₁-(Xur-X¯) X21=(X21-X) The following calculations are given from the data of Real GDP, capital, and labor for 20 years. Syx = 1.3474 ,ΣΥx =2.1115, Σχι=0.6759, Σx1=2.6745, Σx1,x2; = 1.3212 Y = 12.2261, X₁=9.3024, X₂ = 12.6691 Estimate the regression equation. Interpret the value of ß₁ and B₂ What can you say about the output elasticity with respect to labor and output elasticity of the capital? Which one is more elastic?
Let us consider the following Cobb-Douglas production function P, A, LPK2e", Where P = level of output, L= quantity of labor, K = quantity of capital, and Ao is constant. B, and B2 are two parameters. Y,= In(P), B.- In(A), X₁, In(L), X2i = In(K₁), y. (Y-Y) X₁-(Xur-X¯) X21=(X21-X) The following calculations are given from the data of Real GDP, capital, and labor for 20 years. Syx = 1.3474 ,ΣΥx =2.1115, Σχι=0.6759, Σx1=2.6745, Σx1,x2; = 1.3212 Y = 12.2261, X₁=9.3024, X₂ = 12.6691 Estimate the regression equation. Interpret the value of ß₁ and B₂ What can you say about the output elasticity with respect to labor and output elasticity of the capital? Which one is more elastic?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 7E
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A8
Transcribed Image Text:7.
Let us consider the following Cobb-Douglas production function P, =Ao LK2e,
Where P = level of output, L= quantity of labor, K = quantity of capital, and Ao is constant. Brand
B2 are two parameters.
Y,= In(P), B.- In(A), X₁, In(L), X2 = In(K₁),
=
y (Y-Y) X₁ (X₁-X)
X21=(X₂1-X)
The following calculations are given from the data of Real GDP, capital, and labor for 20 years.
Tyx = 1.3474 ,ΣΥx = 2.7115, Σχι=0.6759, Ex=2.6745, ExiX2; = 1.3212
Y = 12.2261, X₁ = 9.3024, X₂ 12.6691
Estimate the regression equation.
Interpret the value of B₁ and B₂
What can you say about the output elasticity with respect to labor and output elasticity of the
capital? Which one is more elastic?
Interpret R² = 0.995080.
What can you conclude about the returns to scale of this economy? And why?
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