Exercise 5: Production and income distribution Consider and economy with the following production technology: Y = 9K1/31

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Exercise 5 Production And Income Distribution Consider And Economy With The Following Production Technology Y 9k1 31 1 (94.11 KiB) Viewed 74 times

Exercise 5: Production and income distribution Consider and economy with the following production technology: Y = 9K1/312/3 where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1. a) Compute the equilibrium wage and capital return. b) Compute total payments to labor and capital. c) Show Euler's Theorem holds, i.e. show that total payments to capital and labor equal the value of output. d) What share of output goes to labor and capital? e) Suppose there is an increase in L, what would be impact on wages and capital returns?