ISI 2011 ME II Q. 8

[L]

I got first part, Technology growth rate = 5.5%
But, stuck in second part.
If anyone has done it, please tell.

[L]

I solved the question now. I am getting answers as
(b) Ga= 15 %
(c) Gp = 35 %

If anybody has done, please confirm.

[Rajat]

Hi L,
Can you share your steps pls. I have solved it but i have had to assume a function F . even then my answers are not matching

[kk]

second one even i got 15 %
 dP/P=1/2 (dw/w) + 1/2(dr/r) - dA/A
 as price will fall due to technology
 

but for the third question am getting 20%
am not completely sure

[Rajat]

Kk, how did you arrive at this total differential equation involving price, w, R and A

[kk]

if we assume the total price as a function of price of inputs and technology and then do the total derivative..it will be dp=1/2 dw + 1/2 dk - da i think the previous expression was wrong

[Rajat]

KK,
I finally got it..
i also got 15 % and 20 % respectively

[L]

I did like this:

In this last line is wrong. Gp should be 17.5 %.

[kk]

what is the level of questions in the entrance examination??same as the sample paper or more difficult?

[L]

Hi kk

This year's sample paper was last year's paper, but, I am not of sure of previous sample papers. And according to me, this year's sample paper's economics section is tougher compared to previous ones.

And what do you think of my solution?

[kk]

o..are u sure??it was last year's question??and what is the cut off marks??and u r from which institute?

[onionknight]

The question says that 1.) F is homogenous of degree one in L and K
2.) Labour and capital remain fully employed
Now if this is the case then for part A we would get different answers for different F. For instance let
F= L+K                         and F=sqrt(LK)
Let initial values be A,Y,L,K and in period two Y becomes 1.09Y, K becomes 1.04K and L becomes 1.03L. Now using the two different functions we'd get different ratios of new A and old A. Please help

[L]

There are some assumptions with the production function which should be specified, like diminishing marginal products, which is very practical, and also you will not have any steady state if marginal products isn't decreasing. Your first function doesn't follow this assumption. Your second function is partially correct (you forgot to multiply A).

[Mike]

I think that you've made some mistake in the part (c)
Answer should be 20%