Elasticity of substitution for CES production function ranges from

✅ Explanation: The elasticity of substitution (σ) for a CES (constant elasticity of substitution) production function is represented by the formula σ = 1/(1-ρ), where ρ is the substitution parameter. The value of ρ ranges between -1 and ∞, which makes the value of σ range between 0 and ∞. In this case, μ represents infinity, making Option B the most accurate answer.

🔑Key Points:
The CES production function
-The Constant Elasticity of Substitution (CES) production function was popularised by K. Joseph Arrow, Hollis B. Chenery, and B.S. Minhas.
-The general form of the CES function is given as Q=A[α1K−β+α2L−β]−h/β
-In this production function, Q is output, K is capital stock, L is labour input, A is efficiency parameter, α1 is capital intensity factor, α2 is labour intensity factor, β is the substitution parameter whose value lies between -1 and ∞, and, h is the degree of homogeneity.
-Elasticity of substitution (ES) = 1 / 1 + β.