The Constant Elasticity of Substitution Function

We now leave the Cobb-Douglas function and move on to the next major development of the ‘Marshallian’ type of production function. This development took the form of generalising the Cobb-Douglas function. This new function, like the Cobb-Douglas, has a constant elasticity of substitution; unlike the Cobb-Douglas, however, its elasticity of substitution is not constrained to be unity. The function is known as the constant elasticity of substitution production function and includes the Cobb-Douglas as a special case.