Elasticity of Substitution

Definition of elasticity

What’s elasticity? Elasticity is a measure of the sensitivity of 1 variable to a change in one other variable, most frequently this sensitivity is the change in value relative to adjustments in different elements. In enterprise and economics, elasticity refers back to the extent to which people, shoppers, or producers …

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On the substitution of private and public capital in production

Abstract Most macroeconomic models assume that aggregate output is generated by a specification of the production function with total physical capital as the key input. This implicitly assumes that private and public capital stocks are perfect substitutes. In this article, we test this hypothesis by estimating a nested CES production …

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Marginal rate of technical substitution

What is the marginal rate of technical substitution – MRTS? The marginal rate of technical substitution (MRTS) is an economic theory that illustrates the rate at which one factor must decrease in order for the same level of productivity to be maintained when another factor is increased. The MRTS reflects …

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