Exercise 9

Approximate change in production

Theory used: Differential and linear approximation Marginal productivities Cobb-Douglas function

A firm has production function $Q (K, L) = 10 K^{\frac{1}{2}} L^{\frac{1}{2}}$ and employs $K = 100$ and $L = 400$ . Using the differential, estimate the production when capital rises to $102$ and labor falls to $396$ .

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