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Definition of Cobb-Douglas Production Function

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Definition: A standard production function which is applied to describe much output two inputs into a production process make. It is used commonly in both macro and micro examples.

For capital K, labor input L, and constants a, b, and c, the Cobb-Douglas production function is:

f(k,n) = bkanc

If a+c=1 this production function has constant returns to scale. (Equivalently, in mathematical language, it would then be linearly homogenous.) This is a standard case and one often writes (1-a) in place of c.

Log-linearization simplifies the function, meaning just that taking logs of both sides of a Cobb-Douglass function gives one better separation of the components.

In the Cobb-Douglass function the elasticity of substitution between capital and labor is 1 for all values of capital and labor.(Econterms)

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