A CES production function approaches a Cobb-Douglas production function as a special case. Comment.
Answers
CES Production Function or Constant Elasticity of Substitution production function denotes the change in Total Product(TP) or total output at the same proportion as the change in inputs/factors of production in the production process by any firm or company.A special type f CES production function can be Cobb-Douglas Production Function.
Explanation:
A CES production function portrays that the rate or proportion at which the inputs/factors of production are employed in the production process by the firm or company,the output or TP will also change at the same or equal rate or proportion.For example,if the firm/company increases the employment of any factor/input by "x" times,the output or TP will also increase by "x" times.All along the CES production function this rate of substitution or interaction between the inputs/factors and output would remain the same or constant.
The Cobb-Douglas Production Function also displays the same interaction between TP/output and the inputs/factors.It exhibits constant returns to scale implying the rate or proportion at which the inputs/factors change in production would affect the change in TP/output at the identical proportion.Therefore,CES production function also corresponds to Cobb-Douglas production function and the latter is considered a special case or model of the former.