Computing the steady state values of the capital-labor ratio


Computing the steady state values of the capital-labor ratio output for every employee also consumption for every employee.

An economy has the per worker production function

yt = 3Ki0.5

Here yt is out per worker and kt is the capital-labour ratio. The depreciation rate is 0.1.

Savings is given by

St = 0.3Yt

Where St is total national savings and Yt is total output.

a.What are the steady state values of the capital-labor ratio, output per worker and consumption per worker?

b. Repeat part (a) for a saving rate .4. Discuss the institutes for your findings about the effect of the higher savings rate.

c. Repeat part (a) for a production yt = 4Ki5. Discuss the initiation for your results.

 

 

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Business Economics: Computing the steady state values of the capital-labor ratio
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