Suppose that output is produced according to the production function Y =Kα[(1 - u)L]1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d.Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u).Write an equation that describes the steady-state of this economy. Find the steady-state capital per worker and steady-state output per worker.Does this production function have constant returns to scale? Explain.

We are going to find Capital per worker, Output per worker to answer this question.

Answered: Suppose that output is produced…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that output is produced according to the production function Y =K^α[(1 - u)L]^1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d.

Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u).
Write an equation that describes the steady-state of this economy. Find the steady-state capital per worker and steady-state output per worker.
Does this production function have constant returns to scale? Explain.

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