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ECON-3020 Lecture Notes - Lecture 3: Disposable And Discretionary Income, Real Interest Rate, Real Wages

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School
Vanderbilt University
Department
Economics
Course
ECON-3020
Professor
Ruppi Saggi

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Document Summary

Other questions: production function, what determines the amount of output produced by an economy, calculate the output in each of the following economies (represented by their production functions and factor endowments). In which of the two economies is the technology more efficient? (i) (ii: what can bring about a change in the economy"s output level, define constant returns to scale. Does either of the above two production functions exhibit constant returns to scale: production function and marginal product, complete the following table for the bread bakery. The price of a loaf of bread is . Y = kl, where k = 5 and l = 4. Y = k1/2l1/2, where k = 25 and l = 16. Explain why: graph the mpl (with l on the x-axis and mpl on the y-axis). Consider the following economy where g = 150, t= 100, y=1200.

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Related Questions

6. A firm has a production function such that y = KL + 2L. The marginal product of K is L, and marginal product of L is K+2.

(a) Find the conditional input demand functions for K and L.

(b) Find the cost function, given that the price per unit of K is r and the price per unit of L is w. Just to be clear, you need an expression showing the cost for any given level of output y expressed in terms of w, r and y.

(c) Does this production function have increasing, decreasing or constant returns to scale?

A firm has production function f(L, K)=min [L1/2 , K1/3/2]. Let w be the price of labor and r be the price of capital.

(a) Determine whether this production function exhibits decreasing, constant, or increasing returns to scale.

(b) Find the firm’s (long-run) cost function.

(c) Let p=2 be the price of the output good, and let w=4 and r=1. Find the firm’s long-run profit-maximizing output level.

Country A and country B both have the production function:

Y = F(K,L) = K^(1/3)L^(2/3).

a) Does this production function have constant returns to scale? Explain.

b) What is the per-worker production function, y = f(k)

c) Assume that neither country experiences population growth nor technological progress and that 20-percent of capital depreciates each year. Assume further that country A saves 10% of output each year and country B saves 30% of output each year. Using your answer from part (b) and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Then find the steady-state levels of income per worker and consumption per worker.

d) Suppose that both countries start off with a capital stock per worker of 1. What are the levels of income per worker and consumption per worker?