Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Creative Destruction and the transition from an initial and a new long run equilibrium due to a new technology a) Suppose there is new technology

Creative Destruction and the transition from an initial and a new long run equilibrium due to a new technology

a) Suppose there is new technology (e.g. Artificial Intelligence) which increases labor productivity. Assume that in the long run, there are no barriers to entry by new firms.Use the profit rate graph and the labor market graphto show the possible transition from an initial and a new long run equilibrium.Use a flow diagram togive a complete explanation that matches your graphs to explain what happens to the profit rate, the number of firms, employment, unemployment rate and real wages.

b) Given your answer to part a), explain what happens to income inequality in the short run due to technological innovation which increases labor productivity. What happens to income inequality in the long run due to technological innovation which increases labor productivity?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Water Pollution Economics Aspects And Research Needs

Authors: Allen V Kneese

1st Edition

1317387554, 9781317387558

More Books

Students also viewed these Economics questions

Question

13. Give four examples of psychological Maginot lines.

Answered: 1 week ago