Re: Production

Posted by MI on May 22, 2013; 4:11am
URL: http://discussion-forum.276.s1.nabble.com/Production-tp7580916p7581142.html

HI Vandita,

Y/K= 0.4 ...given

=> Y= 0.4 x 1000 = 400

As K and L are only factors of production, whole output (read income) will be divided in these two factors.

Labor will get = Employment * wage rate = 200

Profit will be ( or total rent on capital) = Y- labor income = 400 -200 = 200

Profit rate ( rental rate of capital ) = Profit ( or capital income) / K = 200/1000 = 20%