Question: Please guide us on problem 4. Thank you Problem 4 Consider the following production function: Yt = AKPH-a LE where Ke is capital, He is

Please guide us on problem 4. Thank you

Please guide us on problem 4. Thank you Problem 4 Consider the

Problem 4 Consider the following production function: Yt = AKPH-a LE where Ke is capital, He is human capital, It is the amount of workers and A is the (constant) level of technolnow . (i) Does this production function satisfy all the neoclassical properties. Discuss the meaning each property INTUITIVELY. Imagine that parents invest in the human capital of their children up to the point where the MARGINAL PRODUCT OF PHYSICAL CAPITAL, Kt, is equal to the MARGINAL PRODUCT OF HUMAN CAPITAL, Ht. . (ii) What is the relation between Kt and Ht? Use this relation to write down total output as a function of Kt only. Imagine that the number of people in this economy, Nt, is different from the number of workers because some people do not work. Let It = ~ be the number of workers per capita (the fraction of the population that works). Let yt = N. " be output per capita and kt = be capital per capita. Finally, let n be the rate of population growth and Yz the growth rate of labor. . (iii) Using the "effective production function" you derived in (b), write down output per capita, It, as a function of capital per capita, kt, labor per capita, It, the level of population Nt, and the level of technology, A. Following Solow and Swan, assume there is no government and no net exports, that the depreciation rate of capital is the constant S > 0 and the savings rate is constant 0

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