Q = ?L?1K?2E?3 Where L represents number of worker hours, K represents number of

Question

Q = ?L?1K?2E?3 Where L represents number of worker hours, K represents number of trucks used, and E represents energy used. Statistical estimated generated the following values for ?, ?1, ?2, and ?3. ? = 0.01; ?1 = 0.5, ?2 = 0.4, and ?3 = 0.2 a. What are the production elasticities of demand for labor, capital (trucks) and energy? b. If worker hours (labor) are increased by 10% next year, how much will output (Q) increase? c. If the number of trucks (K) decreases by 10% next year, how much will output (Q) decrease? d. What type of returns to scale is consistent with the above production function?

Explanation / Answer

PEoD = (% Change in Quantity Demanded)/(% Change in Price) b)it will increase by 1.1^beta1 c)it decrease by .9^beta2

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