Elucidate the impact of an upward shift of a production function on real salary rate and the equilibrium quantity of labor, equilibrium quantity of goods and rate of interest.
Assume an economy only produces a single consumption good. Consider a permanent upward shift of a production function. Graphically illustrate the effects on each of the following:
1.The real wage rate and the equilibrium quantity of labor.
2.The equilibrium quantity of goods and rate of interest.