00:01
So here we've got a given production function, ak to the point 7l to the point two.
00:06
We are asked to evaluate whether this production function exhibits diminishing, increasing, or constant returns to scale, right? so to do this, right, that's asking us as the inputs of production increase or decrease, do we get a proportional increase in output or more or less? so what i'm going to do is to replace kl with xk and xl and see if we get x, y, less than x, y, or greater than x, y, right? this is what i'm doing, right? let's scale k &l by an arbitrary percentage.
00:52
And if we say increase k &l by 10%, will we get 10 % more output, less than 10 % more output or greater than 10 % output, which is going to answer the question for us, right? so i do this.
01:03
I get a xk to the 0 .7, xl to the 0 .2...