Question

Consider a production function of the form:
$Y = 𝑎 log L + (1 − 𝑎) log K , 𝑎 ∈ (0, 1), 𝑎 ≠ 0.5$
where, Y is output, L is labour, and K is capital. Then, the absolute value of elasticity of substitution is

• A. 1
• B. a
• C. (1 − a)
• D. $\infty$

Answer 1

Answer: (A)

1

Answer 2

The correct answer is (A) : 1