Suppose the production function is Y = 100(K3/10)(EN)7/10 and capital lasts an average of fifteen years. The rate of population growth is 0.5%. The rate of technological progress is 2.5%. The saving rate is 5%.
A. Derive the equation for output per effective worker y = Y/EN = f(k), where k equals the amount of capital per effective worker.
B. Calculate the steady state levels for each of the following:
(1) capital per effective worker,
(2) output per effective worker, and
(3) consumption per effective worker.