Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 25, Problem 3BCQ
To determine
The effects of Grameen Bank’s lending on a community.
Concept Introduction:
Grameen Bank: It is a bank with the main function to provide loans to the poor people without any legal obligations and collateral security. Grameen banks make five member groups where one person approves another person’s loan and helps in the accessibility of loans. It also takes responsibility of a borrower if one gets into any difficulty.
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M” method
Given the following model, solve by the method of “M”. (see image)
As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend.
1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers.
2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.
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