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--- en:production-function-example [2018/07/22 10:11]
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+++ en:production-function-example [2018/07/23 07:45]
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 The Cobb Douglas Production Function is widely used in economic models. It takes the following form:
-Q(L,K) = A Lβ Kα
+Q(L,K) = A L<sup>β</sup> K<sup>α</sup>
 L:labor \\
@@ Line 43: / Line 43: @@
 {{:en:linear-production-function-example.png?nolink|}}
+===== Example 3: One Input Production Function with Diminishing Returns =====
+In this example we will see the case of a production function that has only one factor of production: robots: But if we keep adding robots, the output of each robot will decrease. Maybe because the robots start to chat with each other and it's productivity decreases :-)
+In this example, the production function is:
+Q = 100 * K <sup>0.9</sup>
+If there is only one robot, the output will be the same as in the linear example: 100. But if we add a second robot, the output will be lower:
+*2<sup>0.9</sup>= 186
+Where in the linear example, two robots would have produced 200 T-Shirts
+The charts of both examples is:
+{{ :en:diminishing-returns-production-function-example.svg |}}
+We can see that as we keep adding robots, the difference in the quantity produced between the diminishing returns example and the linear example keeps growing.
+===== Example 4: CES Production Function =====
+This production function has, as the name says, a constant elasticity of subsitution. An example of this production function, using two inputs is:
+Q = F (a * K<sup>α</sup> + (1 - a) L <sup>α</sup>)<sup>1/a</sup>

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