00 the elasticity of consumer demand n is equal to

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between capital and labor, o, is equal to 1.00; the elasticity of consumer demand, n. is equal to 1.00; labor's share of total production costs, , is equal to 0.75; capital's share of total production costs is 1-S =1-0.75 =0.25. The cost of labor, w, is equal to 100; the cost of capital, r, is equal to 50. Suppose the ratio of w to r (= w/r) rises by 50 percent. At the current level of output, by how much will the ratio of capital to labor (K/E) change? (Give a percentage, e.g. "KE will fall (or rise) by x percent.") Explain your answer, show all your work. Alternatively, suppose that the cost of capital, r, rises by 10 percent, while w remains unchanged. What will be the
substitution effect of the change in r on demand for labor E, and what will be the scale effect of this change in r on the demand for labor E? (Be sure to calculate both the substitution effect and the scale effect. Explain your answer, show all your work.) B. 6. Professor Cambridge has performed an analysis of the annual earnings in 2018 in \$ thousand (EARNINGS) of a large number of persons who all received their undergraduate degrees in 2010. All of these

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