In the short-run specific-factors model, consider a decrease in the stock of land. For example, suppose a natural disaster decreases the quantity of arable land used for planting crops. a. Demonstrate a change in the supply of land on the accompanying diagram. b. New equilibrium wage:

In the short-run specific-factors model, consider a decrease in the stock of land. For example, suppose a natural disaster decreases the quantity of arable land used for planting crops. a. Demonstrate a change in the supply of land on the accompanying diagram. b. New equilibrium wage:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Movement of Labor and Capital Between Countries
In the short-run specific-factors model, consider a decrease in
the stock of land. For example, suppose a natural disaster
decreases the quantity of arable land used for planting crops.
a. Demonstrate a change in the supply of land on the
accompanying diagram.
b. New equilibrium wage:
c. New quantity of agricultural labor:
d. The rental on capital will
decrease
increase
remain the same
Wage
20
19
18
17
16
15
14
13
12
11
10
9
8
7
0
5
4
3
2
1
0
P MPL
A A
MPL
01234 678 10 11 12 13 14 15 16 17 18 19 20
Labor

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