Y7

Problem 2 The constant returns to scale CES production function q = [kp + 1p]1/ P has the following expression for the marginal technical rate of substitution: 1 1'P MRTS = (k) a) Derive the expression for the elasticity of substitution, 0. Why do you think that this production function is called \"Constant Elasticity of Substitution function\"? b) Suppose p = 0.5. Calculate a and interpret the result