labour and capital) proportions due to a percentage change in marginal rate of technical substitution. In other words, the production technology has a constant percentage change in factor (e.g. The CES production function is a neoclassical production function that displays constant elasticity of substitution.
This has been done by Arrow-Chenery-Minhas-Solow for the two-factor production case. The constant E.S assumption is a restriction on the form of production possibilities, and one can characterize the class of production functions which have this property.
On the contrary of restricting direct empirical evaluation, the constant Elasticity of Substitution are simple to use and hence are widely used. This aggregator function exhibits constant elasticity of substitution.ĭespite having several factors of production in substitutability, the most common are the forms of elasticity of substitution. Specifically, it arises in a particular type of aggregator function which combines two or more types of consumption goods, or two or more types of production inputs into an aggregate quantity.
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The vital economic element of the measure is that it provided the producer a clear picture of how to move between different modes or types of production. They include Tom McKenzie, John Hicks and Joan Robinson. Several economists have featured in the topic and have contributed in the final finding of the constant. ( December 2021) ( Learn how and when to remove this template message)Ĭonstant elasticity of substitution ( CES), in economics, is a property of some production functions and utility functions. Please help improve this article if you can. The specific problem is: the lede is poorly expressed and confusing. This article may require cleanup to meet Wikipedia's quality standards.
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