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Homework answers / question archive / 1
1.1. Explain how government repair market failures due to COVID 19 pandemic?
2. In your point of you, what is the ideal social assistance program? Why?
2. The Specific Factors Model (cont.): Use the information given here to answer the following questions: Manufacturing: Sales Revenue = Px*QM=500 Payments to Labor = W*Lm= 200 Payments to Capital = RK*K= 300 Agriculture: Sales Revenue = PM*Qm= 500 Payments to Labor = W*Lm=300 Payments to Land = R?*T= 200 Holding the price of manufacturing constant, suppose the increase in the price of agricultural goods is 10% and the increase in the wage is 5%. (a) (6pts) Determine the impact of the price change in agricultural goods on Rf and RK. (b) (2pts) As we did in class, arrange the terms in “greater than” and “less than” order to classify who gains and loses from trade in the short-run.
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2.
In the specific factor model, labour is mobile in both the sector but capital is specific and immobile factor in manufacturing sector
And land is specific and immobile to agriculture sector.
a) So, when the price of agricultural sector and wages will increase then labour in manufacturing will move to the agricultural sector leads to raise the ( Rt) price of land too.
But price of capital will decline as the labour will move towards the agricultural sector. So less labour will be available to work with capital.
b) Losers :
1) Manufacturers
2) Capital owner
gainers
1) Agriculturist
2) Land owners
3) Labour in agriculture
Gains of labour in agriculture sector is greater than the gain than labour in manufacture sector.
