Calculate the Real rental price of capital: Y=ALαK1-α A= 1.5 α= 0.5 L=Labor K= Capital Factor Markets: Labor Supply (L^S)= 100 Labor Demand (L^D)= 200-5(W/P) Supply of Capital (K^S) = 100 Demand for Capital (K^D)= 200-4(R/P) (W/P)= real wage rate (R/P)= real rental rate

Calculate the Real rental price of capital: Y=ALαK1-α A= 1.5 α= 0.5 L=Labor K= Capital Factor Markets: Labor Supply (L^S)= 100 Labor Demand (L^D)= 200-5(W/P) Supply of Capital (K^S) = 100 Demand for Capital (K^D)= 200-4(R/P) (W/P)= real wage rate (R/P)= real rental rate

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 6SQ

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Question

Calculate the Real rental price of capital:

Y=AL^αK^1-α

A= 1.5

^{α= 0.5}

^L=Labor

^{K= Capital}

^{Factor Markets:}

^{Labor Supply (L^S)= 100}
^{Labor Demand (L^D)= 200-5(W/P)}
^{Supply of Capital (K^S) = 100}
^{Demand for Capital (K^D)= 200-4(R/P)}

^{(W/P)= real wage rate}

^{(R/P)= real rental rate}

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