Essay
Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows:
Automobiles: Sales revenue = 200; payments to labor = 100; payments to capital = 100
Corn: Sales revenue = 100; payments to labor = 40; payments to land = 60
Holding the price of automobiles constant, suppose the increase in the price of corn is 20% and the increase in the wage is 10%. What is the impact of this on the income of land and the income of capital? What has happened to the real income of land? What has happened to the real income of capital? What has happened to the real income of labor?
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The increase in the price of corn by 20%...View Answer
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Correct Answer:
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