Episode #125 of the Stack Overflow podcast is here. We talk Tilde Club and mechanical keyboards. Listen now

Questions tagged [elasticity-of-substituion]

Filter by
Sorted by
Tagged with
1
vote
0answers
36 views

Elasticity of substitution

So, this is an economics question but the problem I have is a pure math problem I guess. So I have the following equation:f(x,y) this function have the elasticity of substitution(EOS): 1/(1-beta). a,...
1
vote
0answers
9 views

How to simulate changes in quantity demanded when several prices change?

I am not sure if this is a straightforward question or not. Basically, I have a set of products along with their prices and quantities demanded. I also have own and cross price elasticities for each ...
1
vote
2answers
105 views

If $X$ is a Giffen good then $Y$ must be a normal good

While going through some problems as part of self-study I encountered the following True/False question: Q. Steven only consumes two goods: $X$ and $Y$. If $X$ is a Giffen good for Steven, then $Y$ ...
2
votes
0answers
54 views

Relationship between Elasticity of substitution of sectoral outputs and elasticity of substitution of inputs

There are two sectors Y1 and Y2. Composite output is given by CES form - Each sector employs Capital and Labor in combination through Cobb-Douglas Production Technology. The paper mentions that ...
6
votes
1answer
83 views

Econ Intuition for Jacobian inverse in demand system

Consider the following simple linear demand system (in vector notation) with n different products Demand: $\quad\mathbf{q=B\left(a-p\right)}$ Inverse demand: $\quad\mathbf{p=a-B^{-1}q}$ where $\...
0
votes
1answer
66 views

Elasticity of substitution between leisure in two periods

This is a basic question, but I am new to macro models. The question is from Romer's text. Assume a household only has one member and has no initial wealth, and the household lives for two periods. ...
0
votes
1answer
88 views

Second order partial derivative and cross second-order partial derivative

I'm following a paper (Full text available here!) where at some point (pag.17 and 20) the author get the following derivative: $$\frac{\partial V}{\partial L}=Y-X\frac{dY}{dX}=\alpha X^{-\frac{c}{b}}...
1
vote
0answers
70 views

Demand Elasticity, Factor Substitution: Independent?

Given $ Y=f(K,L;\sigma) $, the effect on labor from a change in the price of capital can be gauged through a substitution effect and a scale effect: \begin{align*} \frac{\partial L}{\partial r} & ...
2
votes
1answer
113 views

Wages, capital: Substitution and Output Effects

Consider a CES production function $Y=f(K,L)$ with elasticity of factor substitution $\sigma>0$. The substitution effect of higher real wages naturally implies a shift along the isoquant to more $...
1
vote
0answers
53 views

Elasticity of substitution meaning

If I computed an elasticity of substitution of f.e. 0.9 between capital and labour, does this implicate that the factors are rather well substitutable or not? Since for 0 they are perfect complements ...
1
vote
0answers
21 views

Raising the elasticity of substitution in an economy

Papers such as de la Grandville (1989) and Klump/de la Grandville (2000) have shown that a higher elasticity of substitution leads to higher economic growth. My question is, if there is a way to ...
2
votes
0answers
91 views

Linearization of VES production funtions

I know that the linearization of a CES (constant elasticity of substitution) funtion is a bit complicated. There is even an R package dedicated just for that - the econometric estimation and ...
2
votes
1answer
39 views

Empirical measurements of consumption and production elasticity of substitution?

The consumption elasticity of substitution (ES) is the ES between different consumption goods. The production ES is the ES between factors of production. My question is: are there any serious ...
2
votes
1answer
243 views

CES production function application problem

I'm currently trying to do some estimations using the micEconCES package in R by Henningsen/Henningsen (2011). My issue is that I am not very familiar with R and I'm trying to implement my own dataset ...
0
votes
1answer
93 views

Interpretation: Elasticitity of Substitution [closed]

I have this production function: $$P(x_1,x_2)=x_1+x_1*x_2$$ I am trying to find the elasticity of substitution, and I found this: $$\sigma = -\frac{d \ln (\frac{x_2}{x_1})}{d \ln(\frac{x_1}{1+x_2})}...
4
votes
1answer
297 views

Complementarity in CES Production Function

I'm reading Fisher (1997, Journal of Monetary Economics). From the intermediate goods produced ($Y_t$), the final goods firm allocates into consumption ($C_t$), business capital investment ($I_{b,t}$),...
3
votes
2answers
130 views

Is optimal labour zero when (i) capital fixed and (ii) elasticity of substitution less than 1?

I am getting some "weird results". I find that in a CES, with short term fixed capital and elasticity of substitution smaller than one, it is optimal for firms to hire zero labour, which seems at odd ...
-2
votes
2answers
207 views

How do find elasticity of substitution for this function

The motive of my post is in search of some help in order to understand the correct way to find the elasticity of substitution by means of calculating the following function. $$f(K, L)=\frac{K^{2}L^{...
1
vote
0answers
88 views

CES utility in dynamic setting

Suppose I have a multiperiod consumption-saving problem with two or multiple goods able to be consumed. If the utility within a period is Constant Elasticity of Substitution, ie. $C = (c_1^\frac{\...
1
vote
0answers
185 views

How does one derive the elasticity of substitution with implicit functions?

I would like to derive the elasticity of substitution. I'm aware that such a thread with a very straightforward explanation already exists, but my case is slightly different and I'm not sure how to ...
3
votes
1answer
175 views

Obj function yielding independent goods demand functions

I know that if the objective function (aka utility) is homothetic, demand functions will be linear in income. So for an homothetic demand function to give goods independent of prices other than their ...
5
votes
1answer
507 views

Estimating elasticity of substitution in nested CES functions

I have aggregate data on $L_t, K_t$ and $X_t$, and want to estimate elasticity of substitution parameters, $\gamma$ and $\sigma$ for these factors. Assuming the production function takes the following ...