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 Find the steady state capital per worker and steady state output per worker.Does this production function have constant returns to scale?

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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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 Find the steady state capital per worker and steady state output per worker.
Does this production function have constant returns to scale?

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