Discussion
In case of inputs being perfect substitutes, elasticity of substitution of such production functions is equal to:
Answer: D
When two inputs are perfect substitutes, the isoquants are straight lines, and the firm can replace one input by the other at a constant rate, however much it uses. The elasticity of substitution is therefore infinite. It is zero for perfect complements (L shaped isoquants) and one for the Cobb Douglas function. The answer is infinity, option D. The isoquant is a straight line when the inputs are perfect substitutes, for example two grades of the same fuel.
No comment is present. Be the first to comment.
Loading…
Post your comment
Please log in or register to post a comment.
Examination Categories
- SSC Exams
- Banking Exams
- Teaching Exams
- Civil Services Exams
- Railways Exams
- Engineering Recruitment Exams
- Defence Exams
- State Government Exams
- Police Exams
- Insurance Exams
- Nursing Exams
- Other Government Exams
- NRA CET
- PG Entrance Exams
- Campus Placement
- MBA Entrance Exams
- CUET and UG Entrance
- Judiciary Exams
- Regulatory Body Exams
- Software Development