The curve below shows the relationship between real GDP per worker and physical

Question

The curve below shows the relationship between real GDP per worker and physical capital per worker in a given economy. Use the graph to answer the questions that follow. What does this graph demonstrate about the relationship between real GDP per worker and physical capital per worker? How much will real GDP per worker increase if physical capital per worker increases from S20.000 to $40,000? How much will real GDP per worker increase if physical capital per worker increases from $40,000 to $60,000?

Explanation / Answer

GDP per worker change from 20,000 to 40,000 = (40,000 - 25,000) = 15,000 $

GDP per worker change from 60,000 to 60,000 = (45,000 - 40,000) = $ 5,000

From the Graph, we can say,:

There are diminishing returns to investment in physical capital.

This should clear all the doubts. Please rate the answers ASAP. Thanks

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