ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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2. A country has the per-worker production function y = 5k05, where ye is output per worker and yt is the
capital-labor ratio. The depreciation rate is 0.2 and the population growth rate is 0.05. The saving function is
St = 0.4Y+, where S is total national saving and Y+ is total output.
a)
Calculate the steady-state value of the capital-labor ratio, output per worker, and consumption per
worker.
b)
Draw a graph to show how the steady state values will change when the population growth rate
increases. Show the original and new steady state on the graph. State how the steady state k, y, and
c change.
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Transcribed Image Text:2. A country has the per-worker production function y = 5k05, where ye is output per worker and yt is the capital-labor ratio. The depreciation rate is 0.2 and the population growth rate is 0.05. The saving function is St = 0.4Y+, where S is total national saving and Y+ is total output. a) Calculate the steady-state value of the capital-labor ratio, output per worker, and consumption per worker. b) Draw a graph to show how the steady state values will change when the population growth rate increases. Show the original and new steady state on the graph. State how the steady state k, y, and c change.
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