What is the Cobb Douglas Formula

Cobb-Douglas function

substitutional macroeconomic production function of the form:

Y = Lα · Kβ,

where: Y = output, L = labor input, K = capital input, α = elasticity of output in relation to labor input (partial production elasticity of labor), β = elasticity in relation to capital input (partial production elasticity of capital). If the sum of the partial production elasticities (α + β) is greater (less than, equal to) one, the Cobb-Douglas function shows increasing (decreasing, constant) returns to scale.

In the case of constant returns to scale (α + β = 1), the following applies:

Y = Lα · K1-α.

In this form, the Cobb-Douglas function is linearly homogeneous, i.e. an increase in the use of labor and capital by each Percent also leads to an increase in output of Percent. It has a constant elasticity of substitution of one, which implies that the isoquants asymptotically approach both axes.