Intermediate Microeconomics

Question 3 Consider the simple Solow growth model without technological progress and without population growth. Assume that the production function has the same properties as we assumed in class. When we look at economic data we usually find that richer individual save a higher fraction of their income compared to poorer individuals. This problem will ask you to analyze how this will affect our model. Suppose that there is a specific threshold level of the capital stock per worker ($ )', below which individuals save a fraction s, and above which individuals save a fraction s, of their income. Mathematically this translates into the following conditions: 91