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In our model, output can be labeled as either consumables or capital goods. Economist call this a one-sector production function. Why does the price of
In our model, output can be labeled as either consumables or capital goods. Economist call this a one-sector production function.
- Why does the price of a unit of consumables always equal the price of a unit of capital in this model? What would happen if the price of consumables exceeded the price of capital goods, or vice versa?
- Suppose that everyone wants to undertake negative gross investment; that is, everyone wants to resell old capital on the commodity market. Can the price of capital goods fall below the price of consumables in this case?
- Consider a "two-sector model," in which different production functions apply to consumables and capital goods. Would the price of a unit of consumables always equal to the price of a unit of capital goods in this model?
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Principles Of Microeconomics
Authors: N Gregory Mankiw
9th Edition
035713348X, 9780357133484
