Mark meldrum - Exam 1 / Question 4 part B (AM mock)

This may sound funny but higher elasticity number multiplying with lower number will bring lower GDP ? I mean capital number is greater too so that can also affect GDP to go higher.

How to reason this ?

Try some numbers. What’s the percentage GDP growth when:

  • α =10%
  • α =30%
  • α =50%
  • α =70%
  • α =90%

Let us know your results; i.e., the percentage GDP growth in each case.