and, Lm +L, = L where L is the total stock of labor in the economy {assume that this is notgrowing over time). Labor is free to move between the two production sectorsand receives identical wages in both sectors. Answer the following: (a) What is the relative price ratio [pm/p3) of the two goods as a func- tion of relative technology values(Am and A3}? (Hint: Use the fact that wages are equalized across sectors. Since wages are equalized, this means that the value of marginal product (p x MPL} is also equalized.) (b) What is the share of services expenditures in the economy (115.152.?r Y)as a function of relative technology values. Suppose initially Am 2 A3, what is the share? What happens if the service technology doubles but manufacturing productivity remains the same, 2A... = A3? (c) The productivity slowdown of the US economy between 1973-95 is of- ten attributed to the rise of the service sector? How are your answers to the previous parts relevant? (d) Suppose instead of equal quantities, indviduals spent equal amounts on both goods i.e. pmM 13.8 How would your answer to 3b change? Do you think this assumption is correct? =1 \f