Hold capital constant at 100 while you increase labor, what happens to output?
Hold labor constant to 100 and raise the level of capital. What happens to output?
What happens when you raise labor and capital by the same amount?
i think the first 2 ques the output increases, what about the last one?
1 answer
The answers to each depend upon a production function. Were you given one? In general, increasing any factor of production should lead to an increase in output. So, output increases under all three. One further point; under most common production functions, output increases the most when both labor and capital are increased, rather than just labor or just capital.