Some production theory. If Y = F(N, K) is a linear homogeneous production function, it possesses several very useful properties (see e.g. Ferguson, 1969, pp. 94-96):

(P1) FNN FKK = Y (Euler's Theorem);

(P2) FN and FK are homogeneous of degree zero in N and K, hence;

SP, K

(P3) NFNN = —KFNK and KK ---ATFKN;

(P4) CrKN FNFK/(YFKN)•

on labour is reduced?

in order to examine the

-` Li must be determined.

(1, the production func-

-md FN and FK depend zed as follows (see the