How many workers would be employed in industry

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Reference no: EM133380348

Case Study: 1. La = labour in agriculture2. Li = labour in industry3. Lu = labour in urban underemployed4. Ltot = total labour in the economy5. wa = wage rate in agriculture6. wi = wage rate in industry7. MPLa = value of marginal product of labour in agriculture8. MPLi = value of marginal product of labour in industry9. m = subsistence wage10. wi = fixed minimum wage in industry11. Pi = Pa = 1. (price of industrial output, price of agricultural output)

Question 1. Assume that there were no distortions in the labour market and free and costless movement between the rural and urban areas, and that

Assume that Ltot = 100, MPLi = 120 - 3 * Li. MPLa = 60 - 0.4La

How many workers would be employed in industry? How many workers would be employed in agriculture? What wage rate will be paid in industry? What wage rate will be paid in agriculture? (Please include 2 decimal units, allowing the possibility of part-time work in both sectors).

Question 2. Maintain the assumptions from question 1, but assume that an additional capital investment in industry (a bigger factory)shifted the MPLi function to: 130 - 3 Li. Answer the same four questions as for questions 1. (Show your work)

Reference no: EM133380348

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