Discuss About The Function And Old Neoclassical Equilibrium?
This study analyses the assumptions of neo classical production function critically. Neo-classical production function is the function of two inputs such as labour and capital. A Neo classical production function has several assumptions to simply the analysis. Cobb-Douglas production function is mostly used neo classical production function in economic analysis. Several authors have criticized some of the assumptions.
The assumptions of neo classical production function are as follows:
iii) The factors of production are substitutable among themselves in a perfectly competitive market. Factors are perfectly mobile.
According to the claim of the heterodox economics, the nature of neo classical production function, the substitution effect has not much effect in real economy (Fuss and McFadden 2014). However, in the view of Chen (2012), Cobb-Douglas production function has many real life applications. Moreover, the production only considers the effect of change in capital and labour. It cannot explain the residual element of the production function such as technology in Solow growth model.
Schefold (2014) stated that neo classical production function estimates elasticity of output with respect to labour and capital according to the. However, this method of measuring output elasticity is not the correct one. Practically this estimation shows the share of profit in production and share of wage in income.
Another assumption of the neo-classical theorists is that both the product and factor market are perfectly competitive, which is unrealistic. There exist other types of market structure such as monopolistic competition, monopoly and oligopoly. Therefore, production function varies across different sectors of the economy (Davis 2013).
The neo classical production function assumes perfect mobility among the factors, which is not always possible in reality. Some of the industries are capital intensive, whereas some of are labour intensive. Hence, the mobility of factors is constrained by their productivity and requirement in the industry (Felipe and McCombie 2014).
As depicted by Dosi et al. (2014), mathematical model of Cobb-Douglas model has similarity with the equation of national accounting identity derivative. However, Schefold (2014) mentioned that Cobb-Douglas production function correctly establish relationship with the national accounts, if the wage share is constant and technological progress is considered in production function.
Fuss and McFadden (2014) cited that technological progress in the neo classical production function has been assumed linear. Dosi et al. (2014) contradicted this view to state that technological progress fluctuates overtime.
Every production process has some externalities irrespective of primary, secondary or tertiary sectors of the economy. The externality may be positive or negative. Therefore, the assumption of no externality is unrealistic.
The analysis of production function is an important concept in mainstream Neo classical economics. Main inputs in this production function are labour and capital. Technology is used in this model as a residual factor in the production. This factor facilitates the production process. Despite having numerous uses, many economists have criticised this production function due to some of its unrealistic assumptions. The report has critically analysed the limitations of these assumptions
Chen, B.Y., 2012. Classification of $ h $-homogeneous production functions with constant elasticity of substitution. Tamkang Journal of Mathematics,43(2), pp.321-328.
Davis, J.B., 2013. The theory of the individual in economics: Identity and value. Routledge.
Dosi, G., Grazzi, M., Marengo, L. and Settepanella, S., 2014. Production theory: accounting for firm heterogeneity and technical change.
Felipe, J. and McCombie, J.S.L., 2014. The aggregate production function:‘Not even wrong’. Review of Political Economy, 26(1), pp.60-84.
Fuss, M. and McFadden, D. eds., 2014. Production Economics: A Dual Approach to Theory and Applications: Applications of the Theory of Production (Vol. 2). Elsevier.
Klump, R., McAdam, P. and Willman, A., 2012. The normalized CES production function: theory and empirics. Journal of Economic Surveys,26(5), pp.769-799.
Pahlavan, R., Omid, M. and Akram, A., 2012. Energy input–output analysis and application of artificial neural networks for predicting greenhouse basil production. Energy, 37(1), pp.171-176.
Raurich, X., Sala, H. and Sorolla, V., 2012. Factor shares, the price markup, and the elasticity of substitution between capital and labor. Journal of Macroeconomics, 34(1), pp.181-198.
Schefold, B., 2014. Marx, the Production Function and the Old Neoclassical Equilibrium: Workable under the Same Assumptions?. In Contribution to the Conference What have we learnt on Classical Economy since Sraffa (pp. 16-17).
Zhelobodko, E., Kokovin, S., Parenti, M. and Thisse, J.F., 2012. Monopolistic competition: Beyond the constant elasticity of substitution.Econometrica, 80(6), pp.2765-2784.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2018). Function And Old Neoclassical Equilibrium. Retrieved from https://myassignmenthelp.com/free-samples/function-and-old-neoclassical-equilibrium.
"Function And Old Neoclassical Equilibrium." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/function-and-old-neoclassical-equilibrium.
My Assignment Help (2018) Function And Old Neoclassical Equilibrium [Online]. Available from: https://myassignmenthelp.com/free-samples/function-and-old-neoclassical-equilibrium
[Accessed 01 June 2020].
My Assignment Help. 'Function And Old Neoclassical Equilibrium' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/function-and-old-neoclassical-equilibrium> accessed 01 June 2020.
My Assignment Help. Function And Old Neoclassical Equilibrium [Internet]. My Assignment Help. 2018 [cited 01 June 2020]. Available from: https://myassignmenthelp.com/free-samples/function-and-old-neoclassical-equilibrium.
At MyAssignmenthelp.com, we understand that when students get stuck with tough assignments, they look for affordable services. To assist students with complex assignments, we have built a team of skilled cheap essay writers. MyAssignmenthelp.com has become one stop solution for all students who often look for answers related to their search similar to do my essay at the cheap rate or who can write my essay at affordable prices. Students prefer hiring us as we have the best provisions to render services related to do my essay online at a reasonable rate.
Answer: Introduction Shire city council have the requirement to develop a smart car parking system with the implementation of advanced technology. The platform is required to be selected for the development of the user interface between the hardware and the users. The sensors installed in the network should be connected in the network and the interface is used to show real time data fetched from the parking system. The system is designed for ...Read More
Answer: Introduction Purpose of Study The object of the study is to distinctively outline the impact of employee turnover on the performance of an organization and how the effects of the impact can be managed. Background and significance. Employee turnover refers to the rate at which an organization losses employees or gains employees, and how long employees tend to join or leave the organization (Holtom, 2016). Employee turnover can be ca...Read More
Answer: About the organisation Nivea is a personal care brand located in Germany. The company specialises in body care products for both males and females. The company is owned by Beiersdorf Global AC and was founded in March 1882. The current name of the company came after it was sold to Oscar Troplowitz. The company started to develop new skin care creams and named it Nivea, which means snow white. The brand and the organisation are widely ...Read More
Answer: Business Processes Business activities of Bakery B A baker is an individual who bakes and sells bread, cakes and pastries. The place where the baker conducts his business activities is known as a bakery. B Bakery has been chosen as the case study in this report. It is basically a family business. The organisation is nearly fifty years old. Bakery B is known to bake bread, confectionary items and sells them in the pub-chains and the ...Read More
Answer: Project scope and WBS In order to upgrade the archive website of the company, the project manager is required to develop a project budgetary plan. It is the responsibility of the project manager to complete the project within the estimated budget and allotted time. Budget variance is referred to as the difference between budget and baseline amount of the revenue, expense and the actual amount. In order to upgrade the website, differen...Read More
Just share Requriment and get customize Solution.
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
The graph plot was excellent and my course coordinator was happy with it and got it with full marks! Would recommend if someone need help in such way.
The expert really did a great job on this discussion question. The professor made remarkable comments. A perfect score was received. Job well-done.
Assignment was really good, I like the way everything was mentioned clearly as I wanted in my assignment, over all I am satisfied,
Very nice job done by My assignment help. Very satisfying with the timely content they have provided.