Economics · Production Functions
Assertion (A): For a Constant Elasticity of Substitution (CES) production function, when the elasticity of substitution equals one, the production function reduces to the Cobb-Douglas form. Reason (R): As the substitution parameter in the CES function approaches 0, the limiting form of the CES function is the Cobb-Douglas function. Select the correct answer:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(A) is incorrect but (R) is correct
- 2(A) is correct but (R) is incorrect
- 3Both (A) and (R) are correct but (R) is NOT the correct explanation of (A)
- 4Both (A) and (R) are correct and (R) is the correct explanation of (A)✓
Correct answer
Both (A) and (R) are correct and (R) is the correct explanation of (A)
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