In a country called Uncle Sam Land (USL), the labor demand curve is given by: W =
Question:
In a country called Uncle Sam Land (USL), the labor demand curve is given by:
W = K – 4L
Where W is the wage rate, K is a variable determined by accumulated capital stock in the country, and L is the labor force in the country.
K = 500 is supplied by the capitalists in USL.
Next to USL, is Aunt Lewis Land (ALL). ALL is poor and has a Dual Economy. A large number of workers in the agricultural sector there are not productive - they are disguised unemployed. They are looking for jobs. Wage in ALL is institutionally fixed (subsistence wage) at W = 10.
Although USL had built a strong impenetrable border wall to prevent ALL migrants from moving in, a firm in USL, called "Coyote International," was able to fly over the impenetrable wall in a helicopter and bring job seekers from ALL who wanted to migrate to USL. As a result of this, USL labor force increases to 110 (L = 110 now). All workers (including migrants) work no matter what the wage is.
Draw approximate diagram(s) and answer the following questions:
- Graphically identify and calculate the capitalists’ income triangles (CIT) before and after migration.
- Graphically identify and calculate the workers’ income rectangles (WIR) before and after migration.
- Graphically identify and calculate the national incomes of USL before and after migration.
Fundamentals of Investments, Valuation and Management
ISBN: 978-1259720697
8th edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin