Explain cobb-douglas aggregate producntion function
economics
Assume a continuous-time solow growth model with no technical progress. The economy
is closed and there is no government sector. Labor supply is given by L_t = e^nt,
n>0. The average propensity to save out of GDP is s,, with 0<s<1. GDP is given by a
Cobb-douglas aggregate producntion function Qt=AK^aL^(1-a), where A is constant.
Solve for steady state of kt where kt=K/L
Suppose the Solow model from this question applies to two seperate economies i=1
and i =2. The economies are the same except for A1>A2 and s1<s2. Let c(i)* and y
(i)* be the steady state consumption per labor and output per labor for economy
i=1,2. Show how C(1)* comparse to c(2)* and how y(1*) compares to y(2)*. (Assume at
equilbrium for both k of each economy such that k1=k2). Then solve for k1>k2 and
k2>k1.
