Suppose that computers use 4 units of capital for each worker, so that , whereas shoes use
Question:
Suppose that computers use 4 units of capital for each worker, so that , whereas shoes use 0.2 units of capital for each worker, so that . There are 200 workers and 200 units of capital in the economy.
a. Solve for the amount of labor and capital used in each industry.
b. Suppose that the number of workers increases to 250 because of immigration, keeping total capital fixed at 200. Again, solve for the amount of labor and capital used in each industry
c. Suppose instead that the amount of capital increases to 250 due to FDI, keeping the total number of workers fixed at 200. Again solve for the amount of labor and capital used in each industry
d. Explain how your results in parts (b) and (c) are related to the Rybczynski theorem.
Computer Shoe KL KL (a) Original 168.4 42.1 31.6 157.9 (b) Immigration 158 39.5 42 210.5 (c) FDI 221.2 55.3 28.8 144.7
Step by Step Answer:
a The above two equations can be solved as b The labor equations are now solved as c The first labor ...View the full answer
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