1. Consider an economy whose production can be characterized by the following production function: Yt = 2K^5 N^5
Suppose that individuals in this economy invest 30% (use .30 in the graph) of what they produce; the labor force in this economy grows at 5% (use .05) per year; and 10% (use .1) of the capital stock wears out each year.
a. Write the production function in per worker terms. Draw a graph of this production function. Introduce a curve that shows the level of investment in the economy for each value of k. Add a segment that shows the required rate of investment for a steady state capital labor ratio. What is the slope of this last line? Show the steady state equilibrium points. Label carefully.