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.