Suppose that an economy has 1,500 units of capital
and 1,000 workers.This economy produces computers
and shoes.Computer production requires 4 units of
capital per worker and shirt production requires 1 unit
of capital per worker.
A) Solve for the amount of labor and capital used in
each industry.
If you answered Question 6 at the end of textbook
Chapter 5, you know that:
(1) KC + KS = the total capital stock, and LC + LS =
the total labor force; and
(2) K = 4 × LC, and KS = 1 × LS.
B) Suppose that the number of workers increases to
1,250 due to immigration, keeping total capital fixed
at 1,000.Solve for the distribution of labor and capital
between the two sectors.
Correct Answer:
Verified
(1) KC + KS = 1,500, and L...
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