Tuesday, March 14, 2006

Alpha Explanation

Q:
What does alpha stand for in the Y=A+aK+(1-a)L equation? Will it be given to us (unless its a problem where we need to solve for it)?

A:
a represents the share of output (income) that goes to owners of capital. It should be given to you. If it is not given to you you can assume it is 0.3 I believe.

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