Recall the model of firm's technology choice illustrated below, which provides an explanation for why the Industrial Revolution occurred in eighteenth-century Britain. 1700s (isocost FG) .Steep isocost: relative price of labour to coal is high. • A-technology now lower cost than the B-technology. • We know this because B lies outside the line FG. 1600s (isocost HJ) Firms use technology B. At this relative price, no incentive to develop technology A. ..We know this because A costs more (it lies outside the line HJ). 1 H 9 10 11 12 13 1 2 3 4 5 6 7 8 Number of workers In addition, recall the figure below which shows the historical trends of wages relative to the cost of capital in England and France from the late sixteenth to the early nineteenth century. 1.8 1.4 England France 0 1580 1600 1620 1640 1660 1680 1700 1720 1740 1760 1780 1800 1820 Year Tonnes of coal 10 2 Wages relative to the cost of capital 9 0.9 0.5

Recall the model of firm's technology choice illustrated below, which provides an explanation for why the Industrial Revolution occurred in eighteenth-century Britain. 1700s (isocost FG) .Steep isocost: relative price of labour to coal is high. • A-technology now lower cost than the B-technology. • We know this because B lies outside the line FG. 1600s (isocost HJ) Firms use technology B. At this relative price, no incentive to develop technology A. ..We know this because A costs more (it lies outside the line HJ). 1 H 9 10 11 12 13 1 2 3 4 5 6 7 8 Number of workers In addition, recall the figure below which shows the historical trends of wages relative to the cost of capital in England and France from the late sixteenth to the early nineteenth century. 1.8 1.4 England France 0 1580 1600 1620 1640 1660 1680 1700 1720 1740 1760 1780 1800 1820 Year Tonnes of coal 10 2 Wages relative to the cost of capital 9 0.9 0.5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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