Tutorial Economic Growth, Winter Term 2012, Marie-Catherine Riekhof

Motivation
Growth in continuous time: Yt = Y0 ebt with growth rate b, and
∂Y
b = Ŷ = YẎ = ∂t Y
= d log(Y
dt
)
, i.e. we use logarithms, exponents, derivatives,
the e-function...

Recapitulation
1. Exponents

• a−n = 1
an
, a 6= 0
√
• a1/n = n
a
• ar · as = ar+s
ar
• as
= ar−s , a 6= 0
• (ar )s = ar·s

2. Logarithms, we use log(x) = loge (x)

• log(a) + log(a) = log(a · b)

• log(a) − log(a) = log(a/b)
• b · log(a) = log(ab )
• log(e) = 1
∂f
3. Derivation Rules, f 0 (x) = fx = ∂x

• f (x) = g(x) · h(x) ⇒ f 0 (x) = g 0 (x) · h(x) + g(x) · h0 (x)

• f (x) = h(g(x)) ⇒ f 0 (x) = h0 (g(x)) · g 0 (x)
h(x)g 0 (x)−g(x)h0 (x)
• f (x) = g(x)/h(x) ⇒ h(x)2

• f (x) = log(x) ⇒ f 0 (x) = 1/x

• f (x) = bxn ⇒ f 0 (x) = bnxn−1

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Exercises
1. Sketch

(a) f (x) = ex
(b) f (x) = log(x)

2. Simplify
√
(a) log( n x)
(b) log(er )
q
a2 b3 b4
(c) b2 a4
ab
(d) log(a) − log(b + a) + log(b) − 1 log( a+b )

3. Calculate the first derivatives with respect to K and to L

(a) Y = a K α Lγ
(b) Y = K α + Lγ
σ−1 σ−1 σ
(c) Y = (a K σ +b L σ ) σ−1
(d) Y = log(K α ) + log(βL)
(e) Y = log(b K
L
)
(f) Y = K exp(L)
(g) z = K + b L; Y = a log(z α )

4. Calculate the log() of the functions

(a) Y = a K α Lγ
(b) Y = K α + Lγ
(c) Y = K exp(L)

5. Simplify σ
σ−1 σ−1
∂Y
Take ∂K of Y = (a K σ + b L σ ) σ−1 and simplify until you attain
1
∂Y L σ−1
∂K
= a(a + b( K ) σ ) σ−1 .

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6. Poland‘s real GDP per capita is around 30% of EU-15‘s GDP per capita.
By how many percentage points needs the growth rate of Poland‘s real
GDP per capita to be higher than the EU-15‘s real GDP per capita
growth rate, if Poland‘s real GDP per capita should reach 80% of the
EU-15‘s real GDP per capita after 20 years?