4. Suppose that the table presented below shows an economy's relationship between real output and the inputs needed to pro. duce that output: LO12.4 Input Quantity Real GDP 150.0 $400 112.5 300 75.0 200 a. What is productivity in this economy? b. What is the per-unit cost of production if the price of each input unit is $2? c. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new per- unit cost of production? In what direction would the $1 increase in input price push the economy's aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real outnut?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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---

### Understanding the Relationship Between Input Quantity and Real GDP

The table below illustrates the relationship between the quantity of inputs used in production and the real GDP produced in an economy. This is important for understanding productivity and cost dynamics within an economic framework.

**Table: Input Quantity and Real GDP**

| Input Quantity | Real GDP ($) |
|----------------|-------------|
| 150.0          | 400         |
| 112.5          | 300         |
| 75.0           | 200         |

**Questions for Analysis:**

a. **Productivity Measurement:**
   - Determine the productivity level in this economy by assessing the output (Real GDP) per unit of input.

b. **Per-Unit Cost of Production:**
   - Calculate the cost of producing each unit of GDP if the price of each input unit is $2.

c. **Impact of Increased Input Prices:**
   - If the input price rises from $2 to $3 without any change in productivity, what is the resulting per-unit cost of production?
   - Analyze how this $1 increase in input price would affect the aggregate supply curve.
   - Evaluate the consequences of this shift in aggregate supply on both the price level and the level of real GDP.

d. **Effect of Enhanced Productivity:**
   - If the rise in input price is avoided but productivity grows by 100%, what would the new per-unit cost of production be?
   - Explore how this change in per-unit production cost influences the aggregate supply curve.
   - Discuss the impact of this shift in aggregate supply on the price level and real GDP.

---

This educational framework guides learners in understanding how changes in input costs and productivity can influence economic metrics, offering insight into supply dynamics and overall economic performance.
Transcribed Image Text:Certainly! Below is a transcription and explanation of the content from the image for an educational website: --- ### Understanding the Relationship Between Input Quantity and Real GDP The table below illustrates the relationship between the quantity of inputs used in production and the real GDP produced in an economy. This is important for understanding productivity and cost dynamics within an economic framework. **Table: Input Quantity and Real GDP** | Input Quantity | Real GDP ($) | |----------------|-------------| | 150.0 | 400 | | 112.5 | 300 | | 75.0 | 200 | **Questions for Analysis:** a. **Productivity Measurement:** - Determine the productivity level in this economy by assessing the output (Real GDP) per unit of input. b. **Per-Unit Cost of Production:** - Calculate the cost of producing each unit of GDP if the price of each input unit is $2. c. **Impact of Increased Input Prices:** - If the input price rises from $2 to $3 without any change in productivity, what is the resulting per-unit cost of production? - Analyze how this $1 increase in input price would affect the aggregate supply curve. - Evaluate the consequences of this shift in aggregate supply on both the price level and the level of real GDP. d. **Effect of Enhanced Productivity:** - If the rise in input price is avoided but productivity grows by 100%, what would the new per-unit cost of production be? - Explore how this change in per-unit production cost influences the aggregate supply curve. - Discuss the impact of this shift in aggregate supply on the price level and real GDP. --- This educational framework guides learners in understanding how changes in input costs and productivity can influence economic metrics, offering insight into supply dynamics and overall economic performance.
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