1. Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?
Senior citizens are easily fooled by "come-ons" and are therefore frequently victims of price discrimination.
Senior citizens are not very sensitive to changes in price.
Senior citizens tend to have inelastic demands for restaurant meals.
Senior citizens tend to have elastic demands for restaurant meals.
2. Two countries, A and B are identical except that the depreciation rate of capital is much higher in A. Both economies have no growth.
A. Show whether A or B have a higher value of GDP per capita in the long-run (in the steady state)? Then explain in words why this would be so.
Suppose both countries are now experiencing exogenous growth in labor productivity Q of 5% per year. Assume their population does not grow.
B. Write the neoclassical growth equation of capital.
C. Write the neoclassical growth eqution of capital per efficient units of labor.
D. Show which economy will experience faster growth in GDP per capita, assuming both countries are at steady state in efficiency unit of labor terms.