![]() A building is composed of commodities, labor and risks and general conditions. If capital is defined as a building, labor is already included in the development of that building. Labor hours and Capital need a better definition. This rationale may be true given the definition of the Capital term. The Cobb–Douglas production function was not developed on the basis of any knowledge of engineering, technology, or management of the production process. However, it is apparent when least squares asymptotic approximations are used. In some cases this simultaneous equation bias doesn't appear. When competition is presumed the simultaneous equation bias has impact on all function types involving firm decisions – including the Cobb Douglas function. Another issue within the fundamental composition the Cobb Douglas production function is the presence of simultaneous equation bias. This assumption is a “constant share of labor in output”, which may not be effective when applied to cases of countries whose labor markets are growing at significant rates. The production function contains a principal assumption that may not always provide the most accurate representation of a country's productive capabilities and supply-side efficiencies. There is now doubt over whether constancy over time exists. Cobb and Douglas were influenced by statistical evidence that appeared to show that labor and capital shares of total output were constant over time in developed countries they explained this by statistical fitting least-squares regression of their production function. The function has been criticised for its lack of foundation. Although a few empirical studies1 have relaxed the assumption of constant returns to scale, not much theoretical consideration has been given to the problem of returns to scale embodied in the aggregate production function. Y ( L, K ) = A L β K α is an elasticity parameter for good i pure competition and constant returns to scale. In its most standard form for production of a single good with two factors, the function is ![]() The Cobb–Douglas form is developed and tested against statistical evidence by Charles Cobb and Paul Douglas between 19 according to Douglas, the functional form itself was developed earlier by Philip Wicksteed. In economics and econometrics, the Cobb–Douglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the amounts of two or more inputs (particularly physical capital and labor) and the amount of output that can be produced by those inputs. A two-input Cobb–Douglas production function with isoquants ![]()
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