Cobb-Douglas production function
Also found in: Wikipedia.
Cobb-Douglas production functiona particular physical relationship between OUTPUT of products and FACTOR INPUTS (LABOUR and CAPITAL) used to produce these outputs. This particular form of the PRODUCTION FUNCTION suggests that where there is effective competition in factor markets the ELASTICITY OF TECHNICAL SUBSTITUTION between labour and capital will be equal to one; that is, labour can be substituted for capital in any given proportions, and vice-versa, without affecting output.
The Cobb-Douglas production function suggests that the share of labour input and the share of capital input are relative constants in an economy, so that although labour and capital inputs may change in absolute terms, the relative share between the two inputs remains constant. See PRODUCTION POSSIBILITY BOUNDARY, CAPITAL-LABOUR RATIO, PRODUCTION FUNCTION, CAPITAL-INTENSIVE FIRM/ INDUSTRY, ISOQUANT CURVE, ISOQUANT MAP.