What is homothetic production?

The broad class of monotonic increasing functions of homogeneous production functions, which includes also the underlying homogeneous functions, is called homothetic. …

What is meant by production function?

Production function, in economics, equation that expresses the relationship between the quantities of productive factors (such as labour and capital) used and the amount of product obtained. It can also be used to determine the cheapest combination of productive factors that can be used to produce a given output.

What are the four types of production function?

Production Functions: 4 Most Important Production Functions | Managerial Economics

• Linear Homogeneous Production Function:
• Cobb-Douglas Production Function:
• Constant Elasticity of Substitution Production Function:
• Variable Elasticity Substitution Production Function:

Is the homothetic production function the same as the homogeneous function?

If the production function is homogeneous (of any degree), the firm’s isoclines including long-run expansion path would be straight lines from the origin. The homothetic production function has the same isoquants as those of its underlying homogeneous function, although, generally, with different quantity indexes.

Is the expansion path of a firm homothetic?

In other words, homotheticity requires that the firm’s expansion path coincides with such a ray. A homogeneous production function is also homothetic—rather, it is a special case of homothetic production functions.

What is the expansion path of a homogeneous production function?

If a firm employs a linearly homogeneous production function, its expan­sion path will be a straight line. To verify this point, let us start from an initial point of cost minimisation in Fig.12, with an output of 10 units and an employment (usage) of 10 units of labour and 5 units of capital.

Which is monotonic increasing function of a homogeneous function?

The broad class of monotonic increasing functions of homogeneous production functions, which includes also the underlying homogeneous functions, is called homothetic. If the production function is homogeneous (of any degree), the firm’s isoclines including long-run expansion path would be straight lines from the origin.