Total Posts:5|Showing Posts:1-5
Jump to topic:

Production function

Authentic
Posts: 3
Add as Friend
Challenge to a Debate
Send a Message
5/11/2016 3:09:12 AM
Posted: 7 months ago
Hello,
So I've been studying microeconomics for business purposes and I do understand the theory and don't have any problems with the calculations, what I don't understand however is the practical side of it, especially when it comes to the production function. Like in applications, the function is already given, maybe a Cobb-Douglas function like: F(K,L)= 1/2 K^1/3 . L^2/3 But in real life application the function won't be already given of course I'll have to set it up myself, my question is how do I got about it? How do I get the constants, the 1/2 and the roots?

Thanks.
ResponsiblyIrresponsible
Posts: 12,398
Add as Friend
Challenge to a Debate
Send a Message
5/11/2016 3:18:59 AM
Posted: 7 months ago
At 5/11/2016 3:09:12 AM, Authentic wrote:
Hello,
So I've been studying microeconomics for business purposes and I do understand the theory and don't have any problems with the calculations, what I don't understand however is the practical side of it, especially when it comes to the production function. Like in applications, the function is already given, maybe a Cobb-Douglas function like: F(K,L)= 1/2 K^1/3 . L^2/3 But in real life application the function won't be already given of course I'll have to set it up myself, my question is how do I got about it? How do I get the constants, the 1/2 and the roots?

Thanks.

By estimating them with real data. The Cobb-Douglas function in its general form is, as you mentioned:

Y = F(K,L) = A * K^a * L^(1-a)

We can log linearize it as:

ln Y = ln A + a ln K + (1-a) ln L

Then you gather data on output, the capital stock, and labor. TFP is virtually impossible to measure, so it's usually thrown into the residual -- the so-called "Solow residual" (i.e., everything else that explains output that isn't capital or labor is a function of technology).
~ResponsiblyIrresponsible

DDO's Economics Messiah
Authentic
Posts: 3
Add as Friend
Challenge to a Debate
Send a Message
5/11/2016 9:39:04 PM
Posted: 7 months ago
I appreciate the response. Can you please give a practical example of that, one with a fictional business' data of your creation? (You set up the data of a fictional business: Workers, capital, etc... and then extract the production function off this data) just so that I can completely comprehend what you have said.

And I understand if that's too much to ask.
Thanks.
ayeshaansari
Posts: 2
Add as Friend
Challenge to a Debate
Send a Message
5/12/2016 9:11:32 AM
Posted: 7 months ago
Everybody can earn 250$+ daily... You can earn from 6000-12000 a month or even more if you work as a full time job...It's easy, just follow instructions on this page, read it carefully from start to finish... It's a flexible job but a good eaning opportunity..
go to this site home tab for more detail

i am student
O_52;_52;_52;_52;`58; =============== >> http://www.pocket-cents50.com...