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The Cobb- Douglas production function is given by the form Y = ALαKβ
Where, Y = Output (mt/day), L = Labour (hours/mt) K = Capita (Rs/mt). By taking the natural logarithm of each term in the function, that is LnY = LnA+αLnL+βLnK. Using a standard multiple linear regression model the parameters of the function were obtained as follows;
Ln Y = 1.389 +0.8LnL + 0.6LnK
(0.53) (0.02) (0.04)
a. Suppose that businesses buy a total of $170 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $88 billion in wages, $24 billion in rent, and $34 billion in interest, how much are households paid for providing entrepreneurial ability?
describe the type of market structure that Apple belongs to.
a). what is the equilibrium level of income?
b). what is the value of the new multiplier? Why is this less than the multiplier in the earlier problem?
c). what is the value of the budget surplus(BS) when I = 50 ?
d). What is BS when investment increases to 100?
e). Assuming that the full employment level of income Y* = 1200, what is the full employment BS* when I=50?
3. Suppose that a consumer with income of birr 90 wants to spend the whole income on good B and good A. Assume that the goods are consumed on a one-to-one basis and one good is worthless without the other. The price of good A and B are both 3 birrs.
i. How many units of good A&B will the consumer buy?
ii. If the price of good A increases to birr 6, how many he/she buy of each?
iii. What type of preferences does consumption of the two goods represent? What is the shape of the indifference curve for this type of preference?
when I-50?
a fiscal change so that the tax rate, t, increases by 0.05 and the government spending increases by
50, will the budget surplus go up or down? Why?
62.5 and t 0.25
a) what is the equilibrium level of income?
b). what is the value of the new multiplier? Why is this less than the multiplier in the earlier
problem?
c) what is the value of the budget surplus(BS) when1=507
d). What is BS when investment increases to 1007
e). Assuming that the full employment level of income Y-1200, what is the full employment BS* when I=50
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