The real cost of labor real wage w equals the

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Unformatted text preview: output and capital shows how economic output, Y, depends on the size of the labor force, L, for a given capital stock, K0, and for a given level of technology, A0. c. Equilibrium in the labor market: i. The demand for capital depends on the marginal product of capital MPL = 1. 2. 3. which: equals the slope of the production function is always positive declines as the amount of labor increases (diminishing marginal product) ii. The supply of labor doesn’t depend on wages (in the sense it is fixed LS = ), but there are son factors that shift the demand for capital curve: 1. Changes in wealth 2. Changes in expected future real wage 3. Changes in the working- age population 4. Changes i...
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