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Questions › JNU › JNU SIS 2021 › Q49
0 marksMicroeconomics › Production and returns to scale › Production functions and the elasticity of substitutionHardabout 2 min

JNU SIS 2021 Question 49: Production and returns to scale

The elasticity of substitution between capital (K) and labour (L) for the production function Y=(Kρ+Lρ)1ρ,ρ≠0Y = (K^{\rho} + L^{\rho})^{\frac{1}{\rho}}, \rho \neq 0Y=(Kρ+Lρ)ρ1​,ρ=0, tends to
A. 1 as ρ⟶0\rho \longrightarrow 0ρ⟶0
B. ∞\infty∞ as ρ⟶−∞\rho \longrightarrow -\inftyρ⟶−∞
C. ∞\infty∞ as ρ⟶0\rho \longrightarrow 0ρ⟶0 Choose the correct answer from the options given below:

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Plain-text version

The elasticity of substitution between capital (K) and labour (L) for the production function Y = (K^ρ + L^ρ)^(1/ρ), ρ ≠ 0, tends to A. 1 as ρ ⟶ 0 B. ∞ as ρ ⟶ -∞ C. ∞ as ρ ⟶ 0 Choose the correct answer from the options given below: (A) B only (B) A only (C) C only (D) A and B only

Also written as: The elasticity of substitution between capital (K) and labour (L) for the production function Y = (K^(rho) + L^(rho))^(1/rho), rho != 0, tends to A. 1 as rho -> 0 B. inf as rho -> - inf C. inf as rho -> 0 Choose the correct answer from the options given below:

Production and returns to scale has come up 92 times in 6 exams since 2007.

What this question tests

This question is on Production functions and the elasticity of substitution, part of Production and returns to scale in Microeconomics.

Cobb-Douglas, CES and fixed-proportions technologies, and how easily inputs substitute.

TestStop has 16 past-paper questions on this subtopic; the nearest in year are below.

  • IIT JAM 2022 · Q23Let a production function be log Q = β/αlog (L^α + K^α), where α ∈ (-∞, 1] - {0} and β > 0. Identify the…
Practise Production and returns to scaleMore on Production functions and the elasticity of substitution

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Question from the JNU SIS 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.