Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as “trunk, shake, and catch” pickers, which vigorously shake oranges from the trees. If widely adopted, what will be the effect on the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects?

Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as “trunk, shake, and catch” pickers, which vigorously shake oranges from the trees. If widely adopted, what will be the effect on the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.12P

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Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesting machines known as “trunk, shake, and catch” pickers, which vigorously shake oranges from the trees. If widely adopted, how will this substitution affect the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects?
The marginal rate of technical substitution is: The rate at which a producer is able to exchange, without affecting the quantity of output produced, a little bit of one input for a little bit of another input. The rate at which a producer is able to exchange, without affecting the total cost of inputs, a little bit of one input for a little bit of another input. The rate at which a producer is able to exchange, without affecting the total inputs used, a little bit of one onput for a little bit of another onput. A measure of the case or difficulty with which a producer can substitute one technique of production for another.
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Distinguish between the Marginal Rate of Technical Substitution and Elasticity of Substitution in production
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Describe the concept of the marginal rate of technical substitution
The marginal rate of substitution of both of them are not correct.
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Suppose that a firm can not give up one input in an exchange for the other and still maintain the same level of output. Calculate the elasticity of substitution in this case and elaborate on your answer.