Technological Change and the Production Function.

An improvement in technology is defined as a change, such as a labor saving discovery, where the firm produces more ouput with the same amount of capital and labor.

A degredation in technology occurs when a firm produces less output with the same amount of capital and labor.

Changes in technology are represented in the Cobb-Douglas Production Function by changing the value of the constants, i.e. A, b or c.

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On spreadsheet change the value of A from 1 to 2.

Before changing A from 1 to 2, 4 units of labor and 4 units of capital produced 4 units of output.

After changing A from 1 to 2, how many units of output are produced?

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