Prove Eulers theorem that, if ( L , K ) is homogeneous of degree(see Exercise 5.7),

Question:

Prove Euler’s theorem that, if ƒ(LK) is homogeneous of degree γ (see Exercise 5.7), then L(∂ƒ/∂L) + K(∂f/∂K) = γƒ(LK). Given this result, what can you conclude if a production function has constant returns to scale? Express your results in terms of the marginal products of labor and capital.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: