I know how to do part a i just need help with part c. Question 5 Suppose that co

Question

I know how to do part a i just need help with part c.

Question 5 Suppose that computers use 4 units of capital for each worker, so that Ko-4 x LC, whereas shoes use 0.2 units of capital for each worker, so that Ks 0.2 x Ls. There are 200 workers and 200 units of capital in the economy. . Solve for t mount of labor and capital xxl in ah industry Hint: The box diagram shows that the amount of labor and capital used in each industry must add up to the total for the economy, so that KoKs 200 and Lc +Ls 200 Use the facts that Kc-4 x Lc and Ks-0.2 x Ls to rewrite these equations as: 4 x Lc + 0.2 x Ls = 200 and Lc + Ls 200 Use these two equations to solve for Le and Ls, and then calculate the amount of capital used in each industry using Ko-4x LC and Ks-0.2x Ls.

Explanation / Answer

Ans.

c) Kc = 4 * Lc and Ks = 0.2 * Ls

workers or labours are 200 whereas there are now 250 units of capital.

So Kc + Ks = 250 and Lc + Ls = 200

substitue for Kc and Ks we get equation as 4 * Lc + 0.2 * Ls = 250 .........(a)

Since , Lc + Ls = 200 , it can be written as Lc = 200 - Ls and substitute in (a)

soving for amount of labour in each industry

4* (200 - Ls ) + 0.2 * Ls = 250

800 - 4Ls + 0.2Ls = 250

3.8Ls = 550

Ls = 144.74

thus, Lc = 200 - Ls = 200 - 144.74 = 55.26

such that Ls+ Lc = 144.74 + 55.26 = 200

The amount of labour in comuter industry is 55.26 and in shoe industry is 144.74.

Now solving for amount of capital

Kc = 4*Lc = 4 * 55.26 = 221.04

Ks = 0.2 * Ls = 0.2 * 144.74 = 28.96

Thus Kc + Ks = 221.04 + 28.96 = 250

amount of capital in computer indutry is 221.04 and caital in shoe industry is 28.96.

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