1. Graphically illustrate and explain the effects of an increase in the rate of technological progress on the Solow growth model
. In your answer, you must clearly label all curves and the initial and final equilibria. In your answer, explain what happens to the rate of growth of output per worker and the rate of growth of output as the economy adjusts to this increase in the rate of technological progress
1 answer:
Answer:
Explanation:
The Solow Growth Model is a short run growth model of economic growth which shows or illustrates the changes in the level of output in an economy over time, as a result of changes in
- savings rate
- population growth rate
- rate of technological progress.
The diagram attached explains the model.
In the short run, increase in technology will increase the output per worker (looking from the microeconomic perspective) and the aggregate output (looking from the macro perspective) in the economy.
This increase in output is later stabilized in the long run.
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Answer:
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- <u>1. The slope is negative</u>
- <u>2. The demand decreases when the prices increase.</u>
Explanation:
<em>Describe the slope of the demand curve?</em>
<em>The slope of the demand curve</em> is negative.
The demand curve is graphed on a coordinate plane with the price in the horizontal axis (typically the x-axis) and the demand on the vertical axis (y-axis).
Thus, the slope will be the rate of change of the demand over the change on the price.
Mathematically:
Since, as you move from left to right, on the x-axis, the prices increase, and the demand (on the y-axis) lowers, the change in demand is negative and the change in the prices is positive, resulting in a negative slope.
This is seen graphycally because the demand curve is decreasing (downward-sloping).
<em>How does the slope reflect the law of demand?</em>
The slope reflects perfectly <em>the law of demand</em> because the law of demand states that, since the resources are scarce, when the prices incrases the quantities demanded decrease.