Cobb Douglas 2

SECTION 11.
3 PARTIAL DERIVATIVES
775
The Cobb-Douglas Production Function
In Example 2 in Section 11.1 we described the work of Cobb and Douglas in modeling the total production P of an economic system as a function of the amount of labor L and the capital investment K. Here we use partial derivatives to show how the particular form of their model follows from certain assumptions they made about the economy. If the production function is denoted by P P L, K , then the partial derivative P L is the rate at which production changes with respect to the amount of labor. Economists call it the marginal production with respect to labor or the marginal productivity of labor. Likewise, the partial derivative P K is the rate of change of production with respect to capital and is called the marginal productivity of capital. In these terms, the assumptions made by Cobb and Douglas can be stated as follows. (i) If either labor or capital vanishes, then so will production. (ii) The marginal productivity of labor is proportional to the amount of production per unit of labor. (iii) The marginal productivity of capital is proportional to the amount of production per unit of capital. Because the production per unit of labor is P L, assumption (ii) says that P L P L
for some constant . If we keep K constant K K0 , then this partial differential equation becomes an ordinary differential equation:
5
dP dL
P L
If we solve this separable differential equation by the methods of Section 7.3 (see also Exercise 67), we get
6
P L, K0
C1 K0 L
Notice that we have written the constant C1 as a function of K0 because it could depend on the value of K0 . Similarly, assumption (iii) says that P K P K
and we can solve this differential equation to get

7
P L 0, K
C2 L 0 K
Comparing Equations 6 and 7, we have

8
P L, K
bL K
776
CHAPTER 11 PARTIAL DERIVATIVES
where b is a constant that is independent of both L and K. Assumption (i) shows that 0 and 0. Notice from Equation 8 that if labor and capital are both increased by a factor m, then P mL, mK b mL mK m bL K m P L, K
If 1, then P mL, mK mP L, K , which means that production is also increased by a factor of m. That is why Cobb and Douglas assumed that 1 and therefore P L, K bL K 1
This is the Cobb-Douglas production function that we discussed in Section 11.1.
11.3
Exercises
1. The temperature T at a location in the Northern Hemisphere
depends on the longitude x, latitude y, and time t, so we can write T f x, y, t . Lets measure time in hours from the beginning of January. (a) What are the meanings of the partial derivatives T x, T y, and T t? (b) Honolulu has longitude 158 W and latitude 21 N. Suppose that at 9:00 A.M. on January 1 the wind is blowing hot air to the northeast, so the air to the west and south is warm and the air to the north and east is cooler. Would you expect fx 158, 21, 9 , fy 158, 21, 9 , and ft 158, 21, 9 to be positive or negative? Explain.
2. At the beginning of this section we discussed the function
(b) In general, what can you say about the signs of I T and I v? (c) What appears to be the value of the following limit? I lim
vl
4. The wave heights h in the open sea depend on the speed v
of the wind and the length of time t that the wind has been blowing at that speed. Values of the function h f v, t are recorded in feet in the following table. Duration (hours) v 10
Wind speed (knots)
5 2 4 5 9 14 19 24
10 2 4 7 13 21 29 37
15 2 5 8 16 25 36 47
20 2 5 8 17 28 40 54
30 2 5 9 18 31 45 62
40 2 5 9 19 33 48 67
50 2 5 9 19 33 50 69
I f T, H , where I is the heat index, T is the temperature, and H is the relative humidity. Use Table 1 to estimate fT 92, 60 and fH 92, 60 . What are the practical interpretations of these values?
3. The wind-chill index I is the perceived temperature when the actual temperature is T and the wind speed is v, so we can write I f T, v . Table 2 (at the bottom of the page) is
15 20 30 40 50 60
an excerpt from a table of values of I compiled by the National Atmospheric and Oceanic Administration. (a) Estimate the values of fT 12, 20 and fv 12, 20 . What are the practical interpretations of these values?
TA B L E 2
Wind speed (km/h)

Actual temperature (C)
T 20 16 12 8
10 18 14 9 5
20 16 11 5 0
30 14 9 3 3
40 13 7 1 5
50 13 7 0 6
60 12 6 0 7
70 12 6 1 7
80 12 5 1 8
90 12 5 1 8
100 12 5 1 8

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SECTION 11.

The Cobb-Douglas Production Function

and we can solve this differential equation to get

Comparing Equations 6 and 7, we have

CHAPTER 11 PARTIAL DERIVATIVES

This is the Cobb-Douglas production function that we discussed in Section 11.1.

1. The temperature T at a location in the Northern Hemisphere

4. The wave heights h in the open sea depend on the speed v

Wind speed (km/h)

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