*5 The following information has been discovered about the economy of Cape Despair. The subsistence real wage rate is £15 an hour. Whenever the real wage rate rises above this level the population grows, and when the real wage rate falls below this level the population decreases. The productivity curve in Cape Despair is as follows:

Capital Real GDP per hour of labour per hour of labour (2001 pounds per hour) (2001 pounds per hour) 20 8 40 15 60 21 80 26 100 30 120 33 140 35 160 36 Initially, the population of Cape Despair is constant and real GDP is at its subsistence level. Then a technological advance shifts the productivity curve upward by £7 at each level of capital per hour of labour. a What is the initial capital per hour of labour and real GDP per hour of labour? b What happens to the real GDP per hour of labour immediately following the technological advance?

c What happens to the population growth rate following the technological advance? d What is the eventually quantity of capital per hour of labour in Cape Despair?