A fifirm employs L labour hours and K machine hours to produce Q total units of output according to a Cobb-Douglas production function Q = 100L0.3K0.7 . In 2018, suppose the fifirm employed 10000 labour hours and 5000 machine hours. In 2019, the fifirm increased the total labour hours by 10% and decreased the total machine hours by 20% from that in 2018.
(a) Use the total difffferential of the Cobb-Douglas production function to approximate the change in fifirm’s total units of output between 2018 and 2019.
(b) Compare your answer with the true change in fifirm’s total units of output between 2018 and 2019.