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Unformatted text preview: elasticity of substitution in this case? B) Calculate x ( w 1 , w 2 , 1) and c ( w 1 , w 2 , 1). 1 C) Suppose that a competitive rm faces the wages w 1 , w 2 ) for its inputs. How does the ratio of factor shares w 1 x 1 ( w 1 , w 2 , 1) w 2 x 2 ( w 1 , w 2 , 1) vary with the ratio w 1 /w 2 ? 5) There are two factors and the production function is F ( x 1 , x 2 ) = x 1 / 2 1 + x 1 / 2 2 2 . A) Show that this is production belongs to the CES family. What is the elasticity of substitution in this case? B) Calculate x ( w 1 , w 2 , 1) and c ( w 1 , w 2 , 1). C) Suppose that a competitive rm faces the wages ( w 1 , w 2 ) for its inputs. How does the ratio of factor shares w 1 x 1 ( w 1 , w 2 , 1) w 2 x 2 ( w 1 , w 2 , 1) vary with the ratio w 1 /w 2 ? 2...
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 Spring '10
 fallahi

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