Essay on Cobb Douglas

Cobb Douglas

Does the Cobb-Douglas production function hold in Indian overall economy for the time period of 2001-2010?

Prepared by: Banira Dahal

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STAND OF ARTICLES:

1) Abstract…………………………………………........................ 3

2) Introduction……………………………………………………4-5

3) Literature review………………………………………………6

4) Target of the analyze ………………………………………... 7

5) Data set and sample period……………………………………8-10

6) Methodology…………………………………………………. 11-13

7) Results……………………………………………………….. 14-16

8) Conclusion……………………………………………………. 17

9) Appendix……………………………………………………18-19 10) References…………………………………………………. 20-21

Abstract

Through this paper particular attention can be paid to the use of Cobb-Douglas production function to analyze the Indian overall economy from 2001-2010. Cobb-Douglas creation function displays the relationship between output and two main inputs: capital and labor. It is often accustomed to know the reveal of two main inputs of development namely capital and labor for creating the total level of output. This kind of paper attempts to find out if the Indian overall economy was more capital rigorous or labor intensive during the time amount of 2001-2010. As well this paper finds out by which time period 2001-2004 or 2005-2010 the imply level of result was increased and the reasons behind it.

To investigate the data, to find out the required goal and to find out if the properties of Cobb-Douglas production function hold accurate or not various record methods just like regression research, hypothesis testing and tools like SPSS are used.

Advantages

The main advices to produce any output happen to be capital and labour. Without these factors production process can not be carried out.

Capital is one of the factors of development which helps with the production process and helps in producing goods or services which subsequently yields positive cash-flow and gives further wealth. Capital can be anything such as money, equipment, machinery and so forth which a strong uses for making its products and services.

Generally, labor identifies the people accustomed to carry out the availability process. Labor is " The aggregate of all human physical and mental effort employed in creation of goods and services” according to the organization dictionary.

Output refers to the outcome of creation process. Mentioned previously by organization dictionary output is simply " The amount of energy,  work,  goods, or services produced by a machine, factory, organization, or a person in a period. ''

Capital and labor are the first and most critical factors for creation of virtually any goods and services. Without capital and labor while the elements of creation any kind output cannot be generated. Hence there is a relationship among output, capital and time. To show the relationship between end result, capital and labour Cobb-Douglas production function is used in economics. Cobb-Douglas production function is the guaranteed most used production function which gives an explanation of actual economy. It can be written while O=A*X^β1*Y^β2 where, O=output, X=labor, Y=capital β1 and β2 are flexibility of different parameters (labor and capital). This production function was developed in 1927 by simply Paul Douglas and one among his friend and mathematician Charles Cobb when searching for the functional form to relate the estimates pertaining to workers and capital. It absolutely was not founded based on the " familiarity with management, anatomist or the technology of the development function”. However it was widespread as an increased measure of efficiency. It has been put on many other contexts like power rather than productivity alone. Development function demonstrates the empirical relationship between output and specified inputs, in economics. It can be used to symbolize output production for a region, industry or possibly a single company. It is mainly used to find out the relationship between end result levels and two inputs. It determines the contribution of factors of production generally...

References: Anon., 2009. GROSS ANNUAL SURVEY OF INDUSTRIES. [Online]. Volume. 1,

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Anon., 2013. BusinessDictionary. com. Output. [Online]

Available at: http://www.businessdictionary.com/definition/output.html#ixzz2P34FAmZA

[Accessed 15 Mar 2015]

Anon., 2013

Gujarati, M. N. Avoir, D. C. & Gunasekar, S., 2012. Basic Econometrics. 5th education. New Delhi: Tata McGraw-Hill.

Hajkova, G., Hurnik, M., 2007. Cobb-Douglas Production Function: The Case of your Converging Economy. [Online]

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Josheski, D., Lazarov, D. & Koteski, C., 2011. Cobb-Douglas production function revisited VA and VECM analysis and a note on Fischer/Cobb-Douglass paradoxon. [Online]

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Murthy, K. V., 2002. Arguing a Case to get Cobb-Douglas Production Function. Report on Commerce Studies,[Online] June., (20),

Available at: http://ssrn.com/abstract=598082

[Accessed 12 March 2015]

Raval, D., 2011

US Section of Transportation Federal Highway Administration, 2012. LITERATURE REVIEW: RESULTS FROM DEVELOPMENT AND PRICE (PROFIT) FUNCTION METHODS. [Online]

Available at: http://www.fhwa.dot.gov/policy/gro98ch2.htm