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Solow Model

1. Verify that, for the neoclassical production function, the marginal product of capital and the marginalproduct of labor are in fact given by (respectively),

∂Y/∂K =f'(K)
∂Y/∂L= f(k)- kf'(K)

(Minimum requirement: a serious attempt at deriving these expressions.)
the professor gave as a clue to keep in mind this function.

Y/K= f(K)= f(K/L)

Solution Preview

Begin with the neoclassical production function:
(1) Y=f(K,L)
Where Y is output, K is capital, and L is labor.

Equation (1) exhibits three notable features. First, the marginal products of K and L are positive. That is, &#8706;Y/&#8706;K>0 and &#8706;Y/&#8706;L>0. An increase in K or L increases Y. The second derivatives are less than zero( &#8706;2Y/&#8706;K2<0 and ...

Solution Summary

Solow Model is utilized.