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Business Math Calculating elasticity of substitution help!

bart11

New member
Feb 13, 2012
6
Calculate the elasticity of substitution between y and x for F(x,y) = 10x^2 + 15y^2

I was able to calculate the Marginal Rate of Substitution as 20x/30y but I'm not sure how to proceed past that. The answer in the book is -1. Any and all help appreciated!
 

dwsmith

Well-known member
Feb 1, 2012
1,673
Calculate the elasticity of substitution between y and x for F(x,y) = 10x^2 + 15y^2

I was able to calculate the Marginal Rate of Substitution as 20x/30y but I'm not sure how to proceed past that. The answer in the book is -1. Any and all help appreciated!
denote rho as the power.

Then elasticity of substitution is

$\dfrac{1}{1-\rho}$

If the power is different, you would have to use the formula.
 

bart11

New member
Feb 13, 2012
6
denote rho as the power.

Then elasticity of substitution is

$\dfrac{1}{1-\rho}$

If the power is different, you would have to use the formula.
Sorry but I'm not sure if I follow. Rho? And I believe the book taught us using the formula so I may be a little confused. Thanks for the help!