In the Solow growth model, the assumption of constant returns to scale means that
Output per worker depends only on capital per worker, not on the number of workers
The Solow model uses an aggregate production function Y = F(K, L). Constant returns to scale means that multiplying both inputs by any factor z multiplies output by the same factor: F(zK, zL) = zF(K, L).
Setting z = 1/L gives \(\frac{Y}{L} = F\left(\frac{K}{L}, 1\right)\), i.e. y = f(k): output per worker depends only on capital per worker.
The number of workers L does not appear in this relationship, so a small and a large economy with the same capital per worker produce the same output per worker. This is what allows the whole Solow model to be analysed in per-worker terms.
Constant returns apply only when both inputs change in the same proportion. If the number of workers alone doubles while capital is unchanged, capital per worker falls and diminishing returns to labour set in, so total output rises by less than double.
The assumption also does not mean that all economies have the same capital per worker (the steady-state k* depends on the saving rate, population growth and depreciation, which differ across economies), nor that the saving rate equals the rate of depreciation (the steady state equates investment sf(k) with break-even investment (n + δ)k, not s with δ).
Hence, the answer is Output per worker depends only on capital per worker, not on the number of workers.
Arrange the following in descending order according to the extent of expenditure of Union Government in Budget 2023-24.
(i) Central Sector Schemes
(ii) Interest Payments
(iii) States' share of taxes and duties
(iv) Centrally sponsored schemes
What is the point elasticity when price is 12 rupees for the demand function P = 60 – 3q.
Match the following:
| List I | List II |
|---|---|
| (a) 12th Finance Commission | (i) Dr. Vijay Kelkar |
| (b) 13th Finance Commission | (ii) Dr. C. Rangarajan |
| (c) 14th Finance Commission | (iii) N. K. Singh |
| (d) 15th Finance Commission | (iv) Y. V. Reddy |
Codes : (a) (b) (c) (d)
Why does a firm under perfect competition continue to operate in the long run despite earning only normal/zero profits ?
When the Total Product (TP) is maximum, the Average Product (AP) is _____ and the Marginal Product (MP) is _____ .
What is the short run supply curve of a firm in a perfectly competitive market ?
According to Bergson-Samuelson social welfare function approach, social welfare is maximized when _____ .
In Chamberlin’s alternative approach, why does the excess capacity of a monopolistically competitive firm emerge ?
Which of the following term is more important in welfare economics and in designing government policy ?
To maintain price leadership, a dominant firm must ensure that _____ .
.................... is a client server application that identifies each host on the internet with a unique user-friendly name.
Every OS has a ................ or .......... which primarily resides in the main memory of the computer to perform some of the basic functions of the OS.
(i) Kernel
(ii) Interface
(iii) Nucleus
(iv) Compiler
Codes:
Which of the following are referred to as low level language?
(i) Machine language
(ii) Assembly language
(iii) High level language
(iv) Natural language
Codes:
Match the following:
| List I | List II |
| (a) New York Public Library | (i) Shelv AR |
| (b) Miami University Augmented Research Group | (ii) Smart library |
| (c) Oula University Library | (iii) Wolf Walk |
| (d) North Carolina State University | (iv) Find the future |
Codes:
Which part of the QR code represents the encoded data?