0
$\begingroup$

I'm using the Cobb Douglas production function for a Mathematics investigation into how optimisation works in Economics. The assumption is that the firm require's only one type of capital, that is, a coffee machine. Keeping this in mind, would it be reasonable to take K as the number of coffee machines used, instead of hours? Thanks, and cheers!

$\endgroup$
1
$\begingroup$

There is no "reasonable" choice here.

One can choose inches over centimeters, gallons of water over kilograms of water, etc. This depends on how you want measure the input quantities. No choice is wrong so long as it is consistent with your other modelling choices.

| improve this answer | |
$\endgroup$
0
$\begingroup$

K only signifies capital. To simplify the calculation, the unit used is often rent rate per hour. Realistically, this is not usually the case, since in actual businesses, capital is not always rented.

So you can use the units as number of tables, but make sure you stay consistent with the unit everywhere. Instead of rent "r" in the economics calculations, you must define cost per table or some similar calculation to replace r. Cheers.

| improve this answer | |
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.