Economics Homework Help

Suppose that the production function is given by Y=K1/2L1/2

a. Derive the steady state levels of capital per worker and output per worker in
terms of the saving rate, s, and the depreciation rate, δ.

b. Suppose δ = 0.05 and s = 0.2. Find out the steady state output per worker.

c. Suppose δ = 0.05 but s increases to 0.5. Find out the steady state output per
worker and compare your result with your answer in part b. Explain the intuition
behind your results.