Illustrate what is output elasticity in this case/ Macroeconomics
Calculating output elasticity in the given case
A firm has carefully measured its production function, and thinks that it can be approximated by:
Q = K^0.55*L^0.45, where Q = units of output, K = units of capital, and L = units of labor.
a. What is output elasticity in this case?
b. What sort of returns to scale does the firm face? Explain.
