- Click on the diagram anywhere to activate the relative price selector and use it to increase the price to 1.2 units of sugar? (per unit of? coal).
An economy can produce good 1 using labor and capital and good 2 using labor and land. The total supply of labor is 100 units. Given the supply of capital, the outputs of the two goods depend on labor input as follows: Labor Input Output Labor Input Output to Good 1 of Good 1 to Good 2 of Good 2 0 0.0 0 0.0 10 25.1 10 39.8 20 38.1 20 52.5 30 48.6 30 61.8 40 57.7 40 69.3 50 66.0 50 75.8 60 73.6 60 81.5 70 80.7 70 86.7 80 87.4 80 91.4 90 93.9 90 95.9 100 100 100 100 The marginal product of labor curves corresponding to the production functions (not given in the problem) are as follows: Workers MPL in MPL in Employed Sector 1 Sector 2 10 1 .51 1 .59 20 1 .14 1 .05 30 1.0 .82 40 .87 .69 Rn 712 an Click the graph, choose a tool in the palette and follow the instructions to create your graph. a. Suppose that the price of good 2 relative to that of good 1 is 2. For simplicity, define P, = 1 and P2 = 2. Given that the total labor allocated between these sectors must sum to 100, determine graphically the wage rate and the allocation of labor between the two sectors. 1.) Using the multipoint curve drawing tool, draw the demand curve for labor in sector 1 by plotting all eight points corresponding to 10 workers employed up to 90 workers employed. Properly label this curve. 2.) Using the multipoint curve drawing tool, draw the demand curve for labor in sector 2 by plotting all eight points corresponding to 10 workers employed up to 90 workers employed. Properly label this curve. 3.) Using the point drawing tool, plot the equilibrium wage and quantity of labor employed in sector 1. Properly label this point. Carefully follow the instructions above and only draw the required objects. b. The labor allocations determined above will produce units of good 1 and |units of good 2. (Enter your responses rounded to one decimal place.) At this production point, the slope of the PPF (with good 2 on the vertical axis) must be equal to (Enter your response rounded to one decimal place.) c. Suppose that the relative price of good 2 falls to 1.3. Sector 1 will now employ workers and sector 2 will now employ |workers. (Enter your responses as integers.) The equilibrium wage will now be $ . (Enter your response rounded to two decimal places.) The labor allocations determined above will produce units of good 1 and units of good 2. (Enter vour responses rounded to one decimal place.)6. Suppose that the relative price of good 2 falls to 1.3. Sector 1 will now employ |:| workers and sector 2 will now employ |:| workers. (Enter your responses as integers.) The equilibrium wage will now be $El. (Enter your response rounded to two decimal pieces.) The labor allocations determined above will produce |:| units of good 1 and D units of good 2. (Enter your responses rounded to one decimai place.) At this production point, the slope of the PPF must be equal to D. (Enter your response rounded to two decimal pieces.) cl. Calculate the effects of the price change from 2 to 1.3 on the income of the specic factors in sectors 1 and 2. The decrease in the relative price of good 2 led to I: in the production of good 1 and |:| in the production of good 2. The change in sector 1 increases the income of |:|. The change in sector 2 decreases the income of|:|. 3.2 9,0 2.8 2.4 I3 2.0 Wage ; 1.2 0.8 0.4 0.0 0 10 20 30 40 50 60 70 80 90 Labor Employed in Sector 1 Labor employed in sector 2 starts from the right and is equal to 100 minus the labor employed in sector 1 After plotting the nal point of your multipoint curve, press the E30 key on your keyboard to end the ne. Assume a specic factors economy produces two goods, cloth and food, and that when representing the output of this economy graphically, cloth is on the x-axis and food is on the yaxis. When the price of cloth increases by 7% and the price of food does not change, A. the wage rate rises by more than the increase in the price of cloth. 0 B. the outputs of the two goods does not change. 0 c. labor shifts from the cloth sector to the food sector. 0 D. the output of cloth rises.
