This document discusses the Cobb-Douglas production function, which is used to model the relationship between inputs like capital and labor, and total output of production. It defines key terms like elasticity of labor and capital, and describes different methodologies for calculating elasticity. It also discusses how increasing a company's capital stock through investment can lead to economic growth by enabling increased profits and efficiency through new machinery and projects.

1. • Cobb Douglas Production Function
• Elasticity of Labor and Capital
• Methodology to Calculate Elasticity
• İnvestment and Capital Stock

2. • In the 1920s the economist Paul Douglas was
working on the problem of relating inputs and
output at the national aggregate level.
• During the decade1909 - 1918, the share of
output payed to labor was fairly constant at
about74%, despite the fact the capital/labor
ratio was not constant.
• Mathematically the problem is this: Assume that
the formula Y =F(K;L) governs relationship between
output Y , capital K, and labor L.

3. • In its most standard form for production of a single
good with two factors, the function is where:
Q= AKα Lß
• Q = total production (the monetary value of all goods
produced in a year)
• L = labor input
• K = capital input
• A = total factor productivity
 α and β are the output elasticities of labor and
capital, respectively.

4. Elasticity of
Labor and Capital
This Quantity Measures:
• the extent to which firms can substitute capital for labor as the
relative productivity
OR
• the relative cost of the two factors changes.
When this number is large, it means that firms can easily substitute
between capital and labor.
In general, the elasticity of substitution depends on the
Amount Of Capital And Labor Employed.

5. Methodology to Calculate
Elasticity
• Total outlay or Expenditure Method
• Proportionate or Percentage Method
• Point Elastic Method
• Arc Elasticity of Method
• Revenue Method

6. İnvestment and Capital Stock
• Capital stock are normally listed on a company's balance
sheet.
• In financial statement analysis,an increasing capital
stock account tends to be a sign of economic health
• Since the company can use the additional proceeds to
invest in projects or machinery that will increase
corporate profits and / or efficiency.

7. This Correlation İndicate Us With The Line, Capital Stock And
Value Added Average Values. And The Points Are Actual Values.

8. Dependent Variable: VA
Method: LeastSquares
Date: 10/27/11 Time: 10:44
Sample: 1973 2000
Includedobservations: 28
Coefficient Std. Error t-Statistic Prob.
C -125147.1 16945.98 -7.385.060 0.0000
EMP -0.008122 0.023321 -0.348252 0.7306
CS 0.271526 0.039113 6.942.135 0.0000
R-squared 0.940860 Meandependent var 16125.43
Adjusted R-squared 0.936129 S.D. dependent var 7.776.565
S.E. of regression 1.965.354 Akaikeinfocriterion 1.810.569
Sumsquaredresid 96565449 Schwarzcriterion 1.824.843
Loglikelihood -2.504.797 Hannan-Quinncriter. 1.814.933
F-statistic 1.988.624 Durbin-Watson stat 1.535.835
Prob(F-statistic) 0.000000
If The R- Square İs Near To 1 That Is Mean We Can Trust This Equation.
We İnvest On The Capital Stock.