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I have been given a production function which states Yt= Kt^0.25N^0.75 Im told the number of...

I have been given a production function which states Yt= Kt^0.25N^0.75

Im told the number of workers is N constant, the saving rate is s and the deprecation of physical capital is δ .

How do I go about explaining the evolution of physical stock over time?

How do I show the the steady state levels of capital per worker and output per worker in terms of the saving rate and depreciation rate?

Thank you

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Answer #1

to find output per capita divide output by number of worker

The steady state is the level of capital per person at which the increase in capital per capita from investment equals its decrease from depreciation and population growth

population growth is 0 because number of workers is constant

this is steady level of capital per worker

this is steady level of output per worker

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