AEB 4283 Homework 3 Updated: June 18, 2021 1. In this problem you will use a Lewis two-sector model of an economy to examine how growing the modern sector affects development. Labor demand in the agricultural sector is given by the following inverse demand function: W L = 100-4.312 where the superscript "d" lets you know that the equation is a demand curve (rather than a supply curve), and you should interpret W. . as meaning "wages on the vertical axis, quantity of labor on the horizontal axis". The inverse labor demand curve for labor in the modern sector is: W L_)=50-3Lm The subsistence wage is 10. The figure below is a diagram of the two-sector model explained above. The demand curve intercept and subsistence wage are labeled for your convenience. Wa Wm 100 WS=10 La - Lm 23.26 ard Turning paint a. [1 point] In equilibrium (that is, when labor is finished moving between sectors and nothing is changing), how much labor used in the modern sector? b. [1 point] In equilibrium, how much labor used in the agricultural sector? c. [1 point] What is the equilibrium wage in the modern sector? d. [1 point] What is the equilibrium wage in the agricultural sector? e. [1 point] How much is spent on labor by firms in the modern sector? f. [1 point] What are the profits ("consumer surplus") in the modern sector? g. [1 point] If labor used in the agricultural drops below the "turning point", wages in agriculture start to rise. What is the "turning point" for labor in the agricultural sector