Elasticity of complementarity - AbsoluteAstronomy.com

Elasticity of complementarity (Hamermesh, 1993) is the percentage responsiveness of relative factor prices to a 1 percent change in relative inputs.

Mathematical definition

Given the production function

then the elasticity of complementarity is defined as

The inverse of elasticity of complementarity is elasticity of substitution

Elasticity of substitution

Elasticity of substitution is the elasticity of the ratio of two inputs to a production function with respect to the ratio of their marginal products . It measures the curvature of an isoquant and thus, the substitutability between inputs , i.e...

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