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The Cobb-Douglas Production Function is a widely used economic model that describes the relationship between two or more inputs, typically capital and labor, and the amount of output produced. It assumes constant returns to scale and that the elasticity of substitution between inputs is equal to one, making it useful for analyzing the effects of changes in input levels on output in an economy.
Marginal Productivity of Labor refers to the additional output generated by employing one more unit of labor, holding all other inputs constant. It is a critical concept in labor economics as it helps determine the optimal level of labor utilization and the wage rate a firm is willing to pay.
Substitutability refers to the extent to which one good or service can replace another in fulfilling a similar function or need for the consumer. It plays a crucial role in determining market dynamics, consumer choice, and pricing strategies, as higher substitutability generally increases competition among producers and can drive prices down.
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