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In: Economics

Solow Growth model Compose a story with a fictional situation or event. then apply the full...

Solow Growth model
Compose a story with a fictional situation or event. then apply the full Solow growth model technological progres to your story. You may analyze the situation or event and give suggestion. You must come up with a story on your own.

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Expert Solution

Suppose the country is conducting research on health of workers which happens to be very poor. Suddenly there is a discovery of a pill that enhances the productivity of the workers, makes it almost twice the initial. But, given the capital stock in the country surprisingly we observe production consumption savings per worker falls. This, is because in the labour augmrnted technological progress, technological progress means increase in effective number of labour since their productivity almost doubles by taking the pil. This, means each worker becomes equivalent to almost 2 workers. A vivid graphical illustration follows. Suggestion would be to find ways to increase the capital stock that will increase the production and hence complement the technological progress.


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