Consider an economy that employs only labor (L) and produces only food (Y). Draw a diagram...

Consider an economy that employs only labor (L) and produces only food (Y).

Draw a diagram that depicts a typical production function for this economy. Describe the two assumptions that give the production function its shape.

Draw another diagram of an assumed subsistence line. What does this line represent (as we discussed in class)?

Draw a diagram that joins the production function with the subsistence line. Show the expected equilibrium level of labor and output. What would we expect to happen if the economy were producing an amount of food (Y) less than this equilibrium level? What would we expect to happen if the economy were producing more than this equilibrium level?

Does this model predict long-term growth? Why or why not?

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Expert Solution

Rahul Sunny answered 1 year ago

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