# Basic economics problem

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#1
Hi, I was wondering if anyone could help me find a solution to the following problem relating to the Solow growth model:

Consider an economy with no population growth and no technological progress described by the production
function Y=K^0.3L^0.7 , where Y is output, K is capital stock and L is labour.

Assume that 30 per cent of output is saved (s=0.3), 10 per cent of the capital stock depreciates every year
(δ=0.10), and the economy starts off with 2 units of k in year 1 where k=K/L.
(A) Find the level of k at the beginning of year 2.
(B) Find the steady state of level of capital per worker ( k*), the steady state level of output per worker
(y*) and the steady state level of consumption per worker (c*).

Any help would be greatly appreciated.

,
0
2 years ago
#2
(Original post by Torres08)
Hi, I was wondering if anyone could help me find a solution to the following problem relating to the Solow growth model:

Consider an economy with no population growth and no technological progress described by the production
function Y=K^0.3L^0.7 , where Y is output, K is capital stock and L is labour.

Assume that 30 per cent of output is saved (s=0.3), 10 per cent of the capital stock depreciates every year
(δ=0.10), and the economy starts off with 2 units of k in year 1 where k=K/L.
(A) Find the level of k at the beginning of year 2.
(B) Find the steady state of level of capital per worker ( k*), the steady state level of output per worker
(y*) and the steady state level of consumption per worker (c*).

Any help would be greatly appreciated.

,
Is this A-level?
0
#3
(Original post by Hello1236969)
Is this A-level?
0
2 years ago
#4
i do a level eco and i have never seen that in my life. miss me with that gay ****
0
2 years ago
#5
Basic economics question would be...supply and demand...

This at least level 5 lol..(year 2)....

False marketing
0
2 years ago
#6
A) Use the equation for how capital stock changes over time. Next period's capital is dependent on current capital which depreciates over time, and investment; k(t+1) = (1-d)k(t) + sy(t). You are given all of these values, you just plug them in.

B) In the steady state, all per capita values are constant over time, e.g. k(t) = k(t+1) = k. Write your equations in this form and this is just a system of simultaneous equations. Solve for k, y, and c.
0
#7
(Original post by Speckle)
A) Use the equation for how capital stock changes over time. Next period's capital is dependent on current capital which depreciates over time, and investment; k(t+1) = (1-d)k(t) + sy(t). You are given all of these values, you just plug them in.

B) In the steady state, all per capita values are constant over time, e.g. k(t) = k(t+1) = k. Write your equations in this form and this is just a system of simultaneous equations. Solve for k, y, and c.
Thank you very much
0
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