Suppose that movies are a normal good, but public transport is inferior. Draw an indifference map with a budget constraint and initial equilibrium. Now let income increase and draw a plausible new equilibrium, noting that one of the goods is inferior.

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Problem-3 Consider the data in the table below: Year Y (billions of 2007 dollars) K (billions of 2007 dollars) N (billions) 2004 1455.6 4312.3 15.92 2005 1502.7 4455.7 16.12 2006 1539.1 4606.8 15.40 2007 1573.5 4759.8 16.77 2008 1589.2 4910.6 17.01 2009 1538.8 5023.5 16.73 2010 1583.7 5154.5 16.96 2011 1633.1 5291.5 17.22 2012 1659.2 5445.7 17.44 2013 1689.9 5591.4 17.69 2014 1733.7 5736.7 17.80 a) Calculate the Solow residual for each year from 2004 to 2014 using F(K,N) = ZK0.3 No.7, b) Calculate percentage rates of growth in output, capital, employment, and total factor productivity for the years 2005 to 2014. In each year, what contributes the most to growth in aggregate output? What contributes the least? Problem-3 Consider the data in the table below: Year Y (billions of 2007 dollars) K (billions of 2007 dollars) N (billions) 2004 1455.6 4312.3 15.92 2005 1502.7 4455.7 16.12 2006 1539.1 4606.8 15.40 2007 1573.5 4759.8 16.77 2008 1589.2 4910.6 17.01 2009 1538.8 5023.5 16.73 2010 1583.7 5154.5 16.96 2011 1633.1 5291.5 17.22 2012 1659.2 5445.7 17.44 2013 1689.9 5591.4 17.69 2014 1733.7 5736.7 17.80 a) Calculate the Solow residual for each year from 2004 to 2014 using F(K,N) = ZK0.3 No.7, b) Calculate percentage rates of growth in output, capital, employment, and total factor productivity for the years 2005 to 2014. In each year, what contributes the most to growth in aggregate output? What contributes the least?

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