Question: 5 suppose that you have a cobbdouglas production function of...
5. Suppose that you have a Cobb-Douglas production function of the following form:
where Y is output, K is capital stock, L is labour, and D is land.
(a) What is the interpretation of the individual exponents on K, L and D respectively?
(b) What is the interpretation of the sum of these coeﬃcients (i.e., which represents the degree of homogeneity for this function)? Is this function subject to constant, decreasing or increasing returns to scale? Explain your reasoning.