en:linear-production-function

The linear production function describes a linear relationship between the inputs and the output.

For example:

Q = aL

Q = aL + bK

Chart:

The linear production function has constant returns to scale.

**Proof**:

Y = aK + bL

Y’ = a (cK) + b (cL)

= c (aK + bL)

= c Y

The elasticity of substitution is ∞.

Proof:

The elasticity of substitution is the change in K/L divided the change in the MTRS, when K/L changes.

The MTRS is constant. The change in the MTRS is always 0.

By definition, the numerator is not 0.

The elasticity of substitution is ∞.

en/linear-production-function.txt · Last modified: 2017/04/11 10:36 by federico

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## Discussion