(b)

consumer has utility over three differentiated goods: a - 1 6 - I U (Ca, Cm, C's) = (Ca Ca + am C'm' + as C's " (1) where a stands for "agriculture", m stands for "manufacturing" and s stands for "services". o Im Is consistent with the EU and US experience since the 1980s. Assume ga, Im and Is do not change over time for simplicity. Show that as time t goes from -co to +oo, the value-added share of agriculture monotonically declines, the share of manufacturing is hump-shaped, and the share of services monotonically increases