Total Output:
Total output will increase by 3%.
Total Output = (1 + 0.1)^0.3 * (1 + 0.1)^0.7
= 1.03
Rental Price of Capital:
The rental price of capital will decrease by 7%.
Rental Price of Capital = (1 + 0.1)^0.3 * (1 - 0.1)^0.7
= 0.93
Real Wage:
The real wage will increase by 4%.
Real Wage = (1 + 0.1)^0.3 * (1 + 0.1)^0.7
= 1.04
Suppose that an economic production function cobb-douglas with parameter alpha = 0.3
a)Suppose that immigration increases the labour force by 10%. What happen to totol output ( inpercent ?), The rental price of capital?, The real wage? Show your working clearly
1 answer