Compute total payments to labor and capital

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Reference no: EM13736084

Consider and economy with the following production technology: Y = 9K^1/3 L^2/3 , where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1.

a) Compute the equilibrium wage and capital return.

b) Compute total payments to labor and capital.

c) Show Euler's Theorem holds, i.e. show that total payments to capital and labor equal the value of output.

d) What share of output goes to labor and capital?

e) Suppose there is an increase in L, what would be impact on wages and capital returns?

Reference no: EM13736084

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