An economy can produce good 1 using labour and capital and good 2 using labour and capital. The total supply of labour is 100 units. Given the supply of capital and capital, the marginal products of labour for the two goods are as follows: Workers Employed 10 20 30 40 50 60 70 80 90 100 MPL in Sector1 4.53 3.42 3 2.61 2.34 2.22 2.07 1.98 1.89 1.8 MPL in Sector 2 4.77 3.15 2.46 2.07 1.8 1.62 1.5 1.38 1.29 1.2 a) Suppose that the price of good 1 is $1 and the price of good 2 is $2. Determine graphically the wage rate and the allocation of labour between the two sectors. [- - . c) Suppose that the relative price of good 2 falls to 1.3. Repeat a). d) Calculate the effects of the price change on the income of the specific factors (capital and capital) in sectors 1 and 2. [^ +~1

An economy can produce good 1 using labour and capital and good 2 using labour and capital. The total supply of labour is 100 units. Given the supply of capital and capital, the marginal products of labour for the two goods are as follows: Workers Employed 10 20 30 40 50 60 70 80 90 100 MPL in Sector1 4.53 3.42 3 2.61 2.34 2.22 2.07 1.98 1.89 1.8 MPL in Sector 2 4.77 3.15 2.46 2.07 1.8 1.62 1.5 1.38 1.29 1.2 a) Suppose that the price of good 1 is $1 and the price of good 2 is $2. Determine graphically the wage rate and the allocation of labour between the two sectors. [- - . c) Suppose that the relative price of good 2 falls to 1.3. Repeat a). d) Calculate the effects of the price change on the income of the specific factors (capital and capital) in sectors 1 and 2. [^ +~1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Republika UPLB has 50 workers. It produces only coffee and white cheese. The production of these two goods has the following labor requirements. Coffee Output 60 56 48 36 20 0 Labor Requirements 50 40 30 20 10 0 White Cheese Output 0 2 4 6 8 10 Labor Requirements 0 10 20 30 40 50 If Republika UPLB is producing 48 units of coffee and 2 units of white cheese, is it using its inputs efficiently?
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Full answer to question a and b
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Q.13. Subject :- Economy
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