Consider two countries Frugalia and Prodigalia (we can call F and P). In both countries the production function is Cobb-Douglas: Y=A*(K^0.5)*(N^0.5). The population growth rate is 0.2, physical capital depreciates at the rate of 0.3, and A = 10. In F, the savings rate Sf = 0.6 and in P it is Sp = 0.4.
a. write the production function in terms of output per capita
b. find the stready-state values of capital-labor ratio(K/N) in both counties.
c. find the steady-state values of output per capita(Y/N) in both counties.
d. in which counties is the marginal product of labor higher in the steady state?
e. in which of the counties is consumption precipitate higher in the steady state?