Show that with price-taking firms the share of labor
Show that with price-taking firms the share of labor/ Business Economics
Suppose two countries, A and B, with the same production function Y = K? L1?? . The value of ? is 0.30, the growth rate of population is 2% and the depreciation rate is 5%.
- a) Show that with price-taking firms the share of labor must be 1?.
- b) Compute the stock of capital, output and consumption per unit of labor in the steady state if the savings rates were 25% for country A and 35% for country B.
- c) Compare both economies to the Golden Rule.
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