Suppose that an economy's production function is cobb-douglas with parameter α = 0.3
a. What fractions of income do capital and labor recieve?
b.Suppose that immigration increase the labor force by 10 percent. What happens to total output (in precent)? The rental price of capital? the real wage?
c. Suppose that a gift of capital from abroad raises the capital stock 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?
d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in perecnet)? The rental price of capital? The real wage?
For concreteness, assume that the production function is Y = 100K0.3L0.7and assume that the economy starts with K = 100 and L = 100. Using this information, calculate exact percentage changes for total output, the real rental rate, and the real wage rate.
Suppose that an economy's production function is cobb-douglas with parameter α = 0.3
a. What fractions of income do capital and labor recieve?
b.Suppose that immigration increase the labor force by 10 percent. What happens to total output (in precent)? The rental price of capital? the real wage?
c. Suppose that a gift of capital from abroad raises the capital stock 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?
d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in perecnet)? The rental price of capital? The real wage?
For concreteness, assume that the production function is Y = 100K0.3L0.7and assume that the economy starts with K = 100 and L = 100. Using this information, calculate exact percentage changes for total output, the real rental rate, and the real wage rate.
