The

elasticity of substitution between labor and capital is one of the key parameters in modern economic theory because the data generating processes describing output growth and capital formation seem to vary relative to it.

The demand side is modeled by a social utility function exhibiting a constant

elasticity of substitution between the demand for health and nonhealth goods along with [mu], a shift parameter, which produces a bias in favor of health goods.

It is common to summarise these factors into a production function, and we may write this in Constant

Elasticity of Substitution (CES) form as

Examples include considering raw materials (Stier and Bengston 1992) and constant

elasticity of substitution production function with two factors of labor and capital (Monroney 1968; Greber and White 1982; Stier 1982, 1983).

In addition, the model with trade in durables helps us to understand the empirical regularity noted in the trade literature: home and foreign goods are highly substitutable in the long run, but the short-run

elasticity of substitution is low.

Technological change and

elasticity of substitution between factors

That is, the modified Laspeyres formula assumes an

elasticity of substitution of zero.

If the

elasticity of substitution between capital and labor--the percentage change in the capital-labor ratio in response to a percentage change in the relative cost of labor and capital--is greater than one, the lowering of the cost of capital results in a decline in the labor share.

This article calculates the effect of the relative worker-supply shift produced by immigrants witii a constant

elasticity of substitution (CES) in a production function (Katz and Murphy 1992).

When there are more than two variables, Blackorby and Russell (1989) suggest using the Morishima

elasticity of substitution which provides a measure of the curvature of the indifference curve.

Consumption goods consist of constant

elasticity of substitution (CES) aggregation of commodities.

This requires that all firms have the same technology, the same scale, and the same

elasticity of substitution, just to name a few.