Mathematical analysis of neoclassical production functions
Journal Title: Економіка: реалії часу - Year 2016, Vol 2, Issue 24
Abstract
It’s discussed the theoretical and methodological issues of using the Cobb-Douglas function and the function with constant elasticity of substitution of resources (CES-function) in the process of the modeling of the most important economic indicators of production, represented in terms of value. It is researched the possibility of the optimizing production within the CES-function depending on the capital-labor ratio. The optimal capital-labor ratio providing the maximizing output of the production is determined. It is considered marginal rate of substitution of resources within the Cobb-Douglas function and the CES-function, provided that the capital-labor ratio reaches the optimum value. It is shown that in this case the marginal rate of substitution of resources is equal to one. It offers a new interpretation of the marginal rate of substitution of resources as an indicator of the disparities of investing money in the aggregated factors "capital" and "labor".
Authors and Affiliations
Vladimir Yankovyi
Keywords
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