Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If A rises by 10 percent,and K and N are unchanged,by how much does Y increase? A)5% B)10% C)15% D)20%

Question

Quizplus · Accepted Answer

If A rises by 10%, the new value of A will be 1.1. Substituting the new value of A and the values of K and N given in the question, we get: Y = (1.1)2000^0.3^N^0.7^. Y = 270.6 Therefore, Y increases by (270.6-246)/246 * 100% = 10%.

Suppose the Economy's Production Function Is Y = AK0

Suppose the Economy's Production Function Is Y = AK⁰