Answered: Consider the computer software…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the computer software industry. Assume [i] labor is responsible for 80 percent of production costs, [ii] software is produced with ﬁxed factor proportions (no capital-labor substitution), [iii] there are no agglomeration Chapter 5

Urban Growth

115

economies, [iv] any change in production cost is passed on to consumers in a higher price, and [v] the price elasticity of demand for software is −1.50. Suppose the wage of software workers increases by 20 percent.

a. The price of software will increase by percent, and the quantity of software demanded will by percent.

b. The quantity of software labor demanded will by percent.

c. The elasticity of demand for software labor is , computed as. . . .

d. If assumption [i] is relaxed, the demand for software labor would be [more, less] elastic because. . . .

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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