Question

For the production function given by q=e^(0.3t)K^(0.75)L^(0.25) where the technical coefficient is denoted by e^(0.3t).

• Both K and L grow at the rate of 1% per annum each, compute the annual growth rate of output.

Answer 1

If both K and L grow at the rate of 1% per annum each, then the annual growth rate of output is: $1.01^{0.75}×1.01^{0.25} = 1.01$ or 1% per annum.