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Econ 100B Section 5 Answers

A y the production function between output and

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Unformatted text preview: s competitive ii. Workers are homogeneous iii. Supply of capitol is fixed iv. Firms maximize profits v. Individuals maximize utility The Production Function: Output (Y) and Capital (K) II. a. Y The production function between output and capital shows how economic output, Y, depends on the size of the capital stock, K, for a given labor force, L0, and for a given level of technology, A0. In lecture, we discussed output and the labor market, where the endogenous variables were Y and L. Because A and K were fixed (exogenous to our model), a change in either variable shifted the curves and led us to a new equilibrium. Let’s look at Output and Capital and the Equilibrium in the Capital Mar...
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