Answered: What must be the relationship between…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What must be the relationship between the rate of growth of technological change (g) and the population growth rate (L/L) for income per capita to continue to increase?

Expert Solution

Step 1

To show the relationship between the technological change and the population growth rate in an effect to increase the per capita income of the people, it is important to know about the three phases involved in the evolution of these parameters.

In the initial phase, can also be termed as the phase of Malthus, there was slow and steady growth in the technology with the proportional increase in the population, so as to maintain the per capita income at a constant level.

This phase showed a positive relationship between the per capita income and the growth rate of the population.

In the next phase, there was an increase in technology which increased the output but because of the high rise in population, the output was imbibed by the people at an increasing rate, which made the per capita income rise but slowly.

And then arise the situation of demographic transition in the economy which created a negative relationship between the rise in population and the per capita income.

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