To evaluate: The partial derivatives of
QL and
QK.
b.
To determine
To estimate: The change in Q when K increases from
K=20toK=20.5 with the help of linear approximation method.
c.
To determine
To estimate: The change in Q with the help of linear approximation method.
d.
To determine
To sketch: The several level curves for the given production function in the first quadrant of the LK plane for
Q=1,2,3.
e.
To determine
To compare: The result when
L=2 is moved along the positive k- direction by using part (d) and the value obtained in part (a),
QK is both consistent or not.
f.
To determine
To compare: The result when
K=2 is moved along the positive L- direction by using part (d) and the value obtained in part(a)
QL is both consistent or not.
Keynesian consumption function expresses consumption as a function of disposable income.Specifically, it statesConst = B0 + B1 YDt + Ut,where: Const: aggregate personal consumer expenditures (PCE) in year t.YDt: Disposable income in year t.B1 is called the marginal propensity to consumer (MPC). Economists have found that the value ofMPC differs in the short run and the long run. Economists also found that in the long run the properform of the consumption function is:Const = B1 YDt + utUsing the “Consumption fn Data” file posted on part 2 of this question, estimate the consumption function in theU.S. You need to run two regressions:• Using 1960 to 1980 data (include all 1960 and 1980 data in the regression), estimate theshort run consumption function in the U.S.• Using all the data set, estimate the long run consumption function in the U.S.Part 1 of 2
Process A
Output : x = 3; y = 1
Input: L = 2; K= 1
Process B
Output : x = 2; y = 1
Input: L = 1; K = 2
Utility Function of indivs. : U=xy.
L = 500 units; K = 500 units
1. In equilibrium, what are the relative
prices of x, y, L and K?
2. What is the effect on the distribution
of income by factor shares of (a) wage
tax ton L employed and (b) excise tax e
on y?
%3D
%3D
The Cobb-Douglas production function is a classic model from economics used to model output as a function of capital and labor. It has the form
f(L, C) = CL1C2
where co, C₁, and c₂ are constants. The variable L represents the units of input of labor and the variable C represents the units of input of capital.
(a) In this example, assume co = 5, C₁ = 0.25, and C₂ = 0.75. Assume each unit of labor costs $25 and each unit of capital costs $75. With $65,000 available in the budget, develop an optimization model for determining how the budgeted amount
should be allocated between capital and labor in order to maximize output.
Max
s.t.
L, C ≥ 0
$
≤ 65,000
(b) Find the optimal solution to the model you formulated in part (a). What is the optimal solution value (in dollars)? Hint: Put bound constraints on the variables based on the budget constraint. Use L≤ 3,000 and C ≤ 1,000 and use the Multistart
option as described in Appendix 8.1. (Round your answers to the nearest integer when necessary.)…