Suppose K = 1000, total amount of capital available for production L= 2000, total amount of labor available for production Suppose use a fixed mix of capital and labor in each sector. aKc = 4, capital used to produce one yard of cloth aLc = 2, labor used to produce one yard of cloth aKF = 1, capital used to produce one calorie of food %3! ALF = 1, labor used to produce one calorie of food %3D a. Suppose the relative price of cloth equals 1. Compute the quantities of cloth and food. b. Now assume the relative price of cloth is equal to 3. Compute the quantities of cloth and food.
Suppose K = 1000, total amount of capital available for production L= 2000, total amount of labor available for production Suppose use a fixed mix of capital and labor in each sector. aKc = 4, capital used to produce one yard of cloth aLc = 2, labor used to produce one yard of cloth aKF = 1, capital used to produce one calorie of food %3! ALF = 1, labor used to produce one calorie of food %3D a. Suppose the relative price of cloth equals 1. Compute the quantities of cloth and food. b. Now assume the relative price of cloth is equal to 3. Compute the quantities of cloth and food.
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.2P
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