精品文档。1欢迎下载Chapter31.In1986,thepriceofoilonworldmarketsdroppedsharply.SincetheUnitedStatesisanoil-importingcountry,thiswaswidelyregardedasgoodfortheU.S.economy.YetinTexasandLouisiana1986wasayearofeconomicdecline.Why?ItcandeducethatTexasandLouisianaareoil-producingstatesofUnitedStates.Sowhenthepriceofoilonworldmarketsdeclined,therealwageofthisindustryfellintermsofothergoods.Thismightbethereasonofeconomicdeclineinthesetwostatesin1986.2。Aneconomycanproducegood1usinglaborandcapitalandgood2usinglaborandland.Thetotalsupplyoflaboris100units.Giventhesupplyofcapital,theoutputsofthetwogoodsdependsonlaborinputasfollows:Toanalyzetheeconomy’sproductionpossibilityfrontier,considerhowtheoutputmixchangesaslaborisshiftedbetweenthetwosectors.a.Graphtheproductionfunctionsforgood1andgood2.),(),(22221111LKQQLKQQProductionFunctionforGood1025.138.148.657.56673.680.787.493.910001020304050607080901000102030405060708090100LaborInputforGood1OutputProductionFunctionforGood2039.852.561.869.375.881.586.791.495.510001020304050607080901000102030405060708090100Output精品文档。2欢迎下载b.Graphtheproductionpossibilityfrontier.Whyisitcurved?ThePPFiscurvedduetodecliningmarginalproductoflaborineachgood.Thetotallaborsupplyisfixed.SoasL1rises,MPL1falls;correspondingly,asL2falls,MPL2rises.SoPPgetssteeperaswemovedownittotheright.2.Themarginalproductoflaborcurvescorrespondingtotheproductionfunctionsinproblem2areasfollows:a.Supposethatthepriceofgood2relativetothatofgood1is2.Determinegraphicallythewagerateandtheallocationoflaborbetweenthetwosectors.Withtheassumptionthatlaborisfreelymobilebetweensectors,itwillmovefromthelow-wagesectortothehigh-wagesectoruntilwagesareequalized.Soinequilibrium,thewagerateisequaltothevalueoflabor’smarginalproduct.2/122211PPPMPLPMPLQ1Q2L1L2PPF),(2222LKQQ),(1111LKQQ100100精品文档。3欢迎下载Theabscissaofpointofintersectionillustratedaboveshouldbebetween(20,30).Sinceweonlyhavetofindouttheapproximateanswer,linearfunctioncouldbeemployed.ThelaborallocationbetweenthesectorsisapproximatelyL1=27andL2=73.Thewagerateisapproximately0.98.b.Usingthegraphdrawnforproblem2,determinetheoutputofeachsector.Thenconfirmgraphicallythattheslopoftheproductionpossibilityfrontieratthatpointequalstherelativeprice.TherelativepriceisP2/P1=2andwehavegottheapproximatelaborallocation,sowecanemploythelinearfunctionagaintocalculatetheapproximateoutputofeachsector:Q1=44andQ2=90.c.Supposethattherelativepriceofgood2fallsto1.Repeat(a)and(b).Q1Q2L1L2PPF),(2222LKQQ),(1111LKQQ10010021slope精品文档。4欢迎下载Therelativedeclineinthepriceofgood2causedlabortobereallocated:laborisdrawnoutofproductionofgood2andentersproductionofgood1(Ｌ1=62,L2=38).Thisalsoleadstoanoutputadjustment,thatis,productionofgood2fallsto68unitsandproductionofgood1risesto76units.Andthewagerateisapproximatelyequalto0.74.d.Calculatetheeffectsofthepricechangeontheincomeofthespecificfactorsinsectors1and2.WiththerelativepricechangefromP2/P1=2toP2/P1=1,thepriceofgood2hasfallenby50percent,whilethepriceofgood1hasstayedthesame.Wageshavefallentoo,butbylessthanthefallinP2(wagesfellapproximately25percent).Thus,therealwagerelativetoP2actuallyriseswhilerealwagerelativetoP1falls.Hence,todeterminethewelfareconsequenceforworkers,theinformationabouttheirconsumptionsharesofgood1andgood2isneeded.Q1Q2L1L2PPF),(2222LKQQ),(1111LKQQ1001001slope21slope精品文档。5欢迎下载3....
