GENERAL KNOWLEDGE

Detailed explanation-1: -In the CES function, the elasticity of substitution is constant but not necessarily equal to unity. It ranges from 0 to ∞. But the CD function is related to elasticity equal to unity. Thus the CD function is a special case of the CES function.

Detailed explanation-2: -The CES production function is a neoclassical production function that displays constant elasticity of substitution. In other words, the production technology has a constant percentage change in factor (e.g. labour and capital) proportions due to a percentage change in marginal rate of technical substitution.

Detailed explanation-3: -In CES production function, the elasticity of substitution between two inputs is:a) Increases continuously.

Detailed explanation-4: -A production function with constant elasticity of substitution (CES) between the inputs-the CES production function as it is called-has two major characteristics. First, it is homogeneous of degree one. Second, it has a constant elasticity of substitution.