Question

In: Economics

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

  1. Consider an economy that employs only labor (L) and produces only food (Y).
  1. Draw a diagram that depicts a typical production function for this economy. Describe the two assumptions that give the production function its shape.

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

  1. 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?

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

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Consider an economy with two goods only. For each part below draw a carefully labeled diagram...
Consider an economy with two goods only. For each part below draw a carefully labeled diagram showing the income and substitution effects for both goods. (a) The price of good 1 increases and both goods are normal. (b) The price of good 2 decreases and good 1 is normal while good 2 is inferior.
Consider an economy where an agent produces a consumption good with labor.
 Consider an economy where an agent produces a consumption good with labor. The agent has the following preferences: u(c, l) = √c+ α√l where c is consumption, I is leisure, and a is a parameter. An agent splits her time between labor and leisure such that n +l= 1 where n is how much she works. Prices for the consumption good is p and labor is w. The agent works at a competitive firm (i.e. zero-profit) which transforms labor using the technology y =F(N)...
Suppose the economy is in long-run equilibrium. [Only one diagram is required for this question, draw...
Suppose the economy is in long-run equilibrium. [Only one diagram is required for this question, draw and label clearly to show all relevant points and moves] [4 marks] Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both-short run and long-run aggregate supply. [4 marks] The central bank raises the money supply by 10%. Use the diagram you drew in part a) to show what happens to...
Suppose economy is in long run equilibrium. [Only one diagram is required for this question, draw...
Suppose economy is in long run equilibrium. [Only one diagram is required for this question, draw and label clearly to show all relevant points and moves] Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both-short run and long-run aggregate supply. The central bank raises the money supply by 10%. Use the diagram you drew in part a) to show what happens to output and price level...
Consider Home produces computers(C) and food(F) using capital(C) and labor(L). The unit factor requirements are fixed...
Consider Home produces computers(C) and food(F) using capital(C) and labor(L). The unit factor requirements are fixed and given by: aLC = 2, aKC = 6, aLF = 3, aKF = 4. The total labor supply is 900 and the total capital stock is 1,500. a. Which good is relatively labor intensive? Which good is relatively capital intensive? b. Derive and draw the PPF of this country. At which point on the PPF are both factors fully employed? c. Suppose Home...
Consider Home produces computers(C) and food(F) using capital(C) and labor(L). The unit factor requirements are fixed...
Consider Home produces computers(C) and food(F) using capital(C) and labor(L). The unit factor requirements are fixed and given by: aLC = 2, aKC = 6, aLF = 3, aKF = 4. The total labor supply is 900 and the total capital stock is 1,500. Foreign, with a labor supply of 1,200 and a capital stock of 1,800. Foreign shares the same technology with Home (i.e., aLC=2, aKC= 6, a∗LF = 3, a∗KF = 4). Home and Foreign engage in free...
The country of La la land has an agrarian economy and only produces food on a...
The country of La la land has an agrarian economy and only produces food on a fixed supply of land. The production of food per person hasn’t increased for a very long time even though better fertilizers have become available. Seeing this an economist tries to understand the country’s predicament using a mathematical model. Production in the model is given by a function that combines land and labor in the following way. Y = AL0.3N 0.7 Everything that is produced...
Consider an economy that produces output with labor and capital, with those goods allocated to consumption,...
Consider an economy that produces output with labor and capital, with those goods allocated to consumption, investment, and government purchases. Suppose the government very temporarily, and unexpectedly, increases its purchases of goods. (Assume the government finances these temporary purchases by issuing additional debt. Assume the government only purchases goods—it does not produce goods, or employ labor directly.) Explain the impact of this increase in government spending in both the goods and labor markets today. What happens to consumption demand, investment...
Consider an economy that uses two factors of production, capital (K) and labor (L), to produce...
Consider an economy that uses two factors of production, capital (K) and labor (L), to produce two goods, good X and good Y. In the good X sector, the production function is X = 4KX0.5 + 6LX0.5, so that in this sector the marginal productivity of capital is MPKX = 2KX-0.5 and the marginal productivity of labor is MPLX = 3LX-0.5. In the good Y sector, the production function is Y = 2KY0.5 + 4LY0.5, so that in this sector...
Draw a supply and demand diagram for the market for food. (a) If the Supply curve...
Draw a supply and demand diagram for the market for food. (a) If the Supply curve is perfectly elastic, what happens to price and quantity when demand shifts? (b) If the Demand curve is perfectly inelastic, what happens to price and quantity when supply shifts?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT