Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a competitive economy with two sectors, services and manufacturing, and assume that labor can move freely between the sectors. The (marginal) productivity of workers

Consider a competitive economy with two sectors, services and manufacturing, and assume that labor can move freely between the sectors. The (marginal) productivity of workers in the manufacturing sector rises over time due to technological progress but that of workers in the services sector does not. Show that, as a result, the price of services rises relative to that of manufactured goods.

Step by Step Solution

3.40 Rating (162 Votes )

There are 3 Steps involved in it

Step: 1

As the marginal productivity of workers in the manufacturing sector increases due to technological p... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Trade

Authors: John McLaren

1st edition

0470408790, 978-0470408797

More Books

Students also viewed these Accounting questions