Question

Computers: Sales revenue = PC x QC = 150 Payments to labor = W x LC...

Computers: Sales revenue = PC x QC = 150 Payments to labor = W x LC = 75 Payments to capital = RK x K = 75 Barley: Sales revenue = PB x QB = 150 Payments to labor = W x LB = 70 Payments to land = RT x T = 80

What is the specific factor for each type of production? Holding the price of computers constant, suppose the percentage increase in the price of barley is 10% and the percentage increase in wage is 5%.

a. Determine the impact of the increase in the price of barley on the rentals on land.

b. Determine the impact of the increase in the price of barley on the rentals on capital

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Answer #1

For computers capital is specific. For barley land is specific. Even labour in both sectors us specific due to training required but it can be substituted for each other to some extent

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