Cobb-Douglas Production Functions. This family of functions takes on the form, where 𝓁 is one factor of production (often labor) and is the second factor of production (often capital). The sum of the exponents determines the returns to scale on factor inputs. The below mentioned article provides a close view on the Cobb-Douglas Production Function. The Cobb-Douglas production function is based on the empirical. Figure 1: A two-input Cobb-Douglas production function. In economics, the Cobb-Douglas functional form of pro- duction functions is widely.


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The Cobb-Douglas Production Function

L is the amount of labor expended, which is typically expressed in hours. K represents the amount of physical capital input, such as the number of hours for a particular machine, operation, or perhaps factory.

A, which appears as a lower case b in some versions of this formula, represents the total factor productivity TFP that measures the change in output that isn't the result of the inputs. Typically, this change in TFP is the result of an improvement in efficiency or technology.

The Greek characters alpha and beta reflect cobb douglas production functions output elasticity of the inputs. Output elasticity is the change in the cobb douglas production functions that results from a change in either labor or physical capital.

Cobb-Douglas Production Function

For example, if the output elasticity for physical capital K is 0. The same is true for the output elasticity of labor: Marginal Product Another concept associated with the Cobb-Douglas production function is marginal product, which is the change in the output that results from one additional unit of cobb douglas production functions single production factor with all other factors held constant.

Or, as the economists say, ceteris parabis, which means 'all other things equal.

For example, consider a company called WeeBee Toys. When there are no workers in the factory, there is no output even though physical capital is present.

The Cobb Douglas Production Function: Definition, Formula & Example

When a single worker shows up, three units are produced per labor hour. When two workers come in, output increases to five units per hour. The addition of the labor of the second worker results in two more units per hour, cobb douglas production functions a marginal product of two. In the C-D production function, the problem of measurement of capital arises because it takes only the quantity of capital available for production.

What is Cobb-Douglas Production Function? definition and meaning - Business Jargons

But the full use of the available capital can be made only in periods of full employment. This is unrealistic because no economy is always fully employed. The C-D production function is criticised because it shows constant returns to scale.

But constant returns cobb douglas production functions scale are not an actuality, for either increasing or decreasing returns to scale are applicable to production.


It is not possible to change all inputs to bring a proportionate change in the outputs of all the industries. Some inputs are scarce and cannot be increased in the same proportion as abundant inputs.


On the other hand, inputs like machines, entrepreneurship, etc. As output increases due to the use of indivisible factors to their maximum capacity, per unit cost falls.

Thus when the supply of inputs is scarce and indivisibilities are present, constant returns to scale are not possible. Whenever the units of different inputs are increased in the production cobb douglas production functions, economies of scale and specialization lead to increasing returns to scale.