Question: ii) Production function shows the relationship between output and input. Suppose an economy's production function is specified by Y = ALK, where Y is GDP,

ii) Production function shows the relationship between output and input. Suppose an economy's production function is specified by Y = ALK, where Y is GDP, A represents the state of technology which is equal to 100, K is the physical capital which is equal to 25 and L is the quantity of labor.

a) Plot the levels of output (on the y axis) associated with 1, 2, 4 and 6 labor units (on the x axis) and label this production function PF.

b) Show graphically on the same x and y axis what happens to this production function if there is a technological advancement in this economy.

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