The Cobb-Douglas Production Function was developed by Charles W. Cobb and Paul H. Douglas, based on their empirical study of American manufacturing industry.

**Cobb-Douglas
Production Function**

Cobb -Douglas Production Function is a specific standard
equation applied to describe how much output can be made with capital and
labour inputs. It is used in empirical studies of manufacturing industries and
in inter-industry comparisons. The relative shares of labour
and capital in total output can also be determined. It is still used in the
analysis of economies of modern, developed and stable nations in the world.

The
Cobb-Douglas Production Function was developed by Charles W. Cobb and Paul H.
Douglas, based on their empirical study of American manufacturing industry. It
is a linear homogeneous production function which implies that the factors of
production can be substituted for one another up to a certain extent only.

The
Cobb-Douglas production function can be expressed as follows.

*Q = AL*^{α}* K*^{ß}

Where, Q
= output; A = positive constant; K = capital; L = Labor α and β are positive
fractions showing, the elasticity coefficients of outputs for the inputs labor
and capital, respectively.

ß= (1- α)
since α + ß = 1. denoting constant returns to scale.

Factor
intensity can be measured by the ratio ß / α.

The sum
of a + ß shows the returns to scale.

i.
(α + ß) =1,
constant returns to scale.

ii.
(α + ß)
<1, diminishing returns to scale.

iii.
(α + ß)
>1, increasing returns to scale.

·
The production function explains that with the
proportionate increase in the factors, the output also increases in the same
proportion.

·
Cobb-Douglas production function implies constant
returns to scale.

·
Cobb-Douglas production function considered only
two factors like

·
Cobb-Douglas Production Function is a specific
standard equation applied to describe how much output can be made with capital
and labour inputs. It is used in empirical studies of manufacturing industries
and in inter-industry comparisons. The relative shares of labour and capital in
total output can also be determined. It is still used in the analysis of
economies of modern, developed and stable nations in the world.

·
labour and capital. Production takes place only
when both factors are employed.

·
Labour contributes three-fourth of production and
capital contributes one-fourth of production.

·
The elasticity of substitution between the factors
is equal to one.

Tags : Production Analysis | Economics , 11th Economics : Chapter 3 : Production Analysis

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11th Economics : Chapter 3 : Production Analysis : Cobb-Douglas Production Function | Production Analysis | Economics

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