Page 80 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.70, # 1, 2013, pp. 77-96

progress and reflects the time pattern, is a parametr showing the elasticity of

substitution. ( ),

(2)

In CES production function as in Cobb-Douglas production function, K and L

are constant dependants of substitution limit. (see: box 1).

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Box 1: The rate of substitution limit.

The rate of substitution of labour factor with capital factor in conditions when

production level is constant is equal to additional capital required for decrease of

one unit of labour.

X  f : I (K, L)  Y 0 , (B1.1)

Here: Y 0 – the given level of output

(B1.1) if we differentiate the iso-quantum we will obtain the following

quotation:

 f(X) dK   f(X) dL  0
 (K )  ( )L

Considering that difined in this way, we obtain the following

quuatation:

(B1.2)

If we expand the quotation (B1.2),

(B1.3)

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