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The example your textbook uses for a production function is Q = f(L, K) where Q...

The example your textbook uses for a production function is Q = f(L, K) where Q is output, L is labor, and K is capital. Such a formulation implies aggregation of capital. Discuss the problems associated with this aggregation.

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Answer #1

The standard equation of production is controverial in nature and is a topic of debate. Also in microeconomics , thoery the aggreagte production function is evaluated by the summation of every production function by individual producer.but there are some problems in methodologies related with the prodcution function .On the concpet of capital The methodology followed to measure factor input capital and distraction made by the notion of factor proportion.In the equation K whihc is the quantity of capital does not have porper unit .We can say that it is not possible to come up with the capital that K is indepenent of the wages and rate of interest.

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