Question

Productivity (bags of wheat Y/L) 5 C A D B 10 Capital per hour of labour K/L Study the above graph (Y and K have both been divided by L to create a 'productivity curve'. More K per worker raises total production per worker (notice the productivity curve flattens because of diminishing marginal returns to K). At point A, each worker has 10 units of capital and each produces 5 bags of wheat per hour. If each worker gets more capital, productivity per worker rises and there is movement along the productivity curve Explain (briefly) whether or not there is a movement from A to B, C or D in the following scenarios. a. The stock of K doubles and the L supply doubles. b. The stock of K has increased by a greater percentage than the labour force. c. There has been a technological improvement.

          Productivity
(bags of wheat Y/L)
5
C
A
D
B
10
Capital per
hour of labour K/L
Study the above graph (Y and K have both been divided by L to create a
'productivity curve'. More K per worker raises total production per worker
(notice the productivity curve flattens because of diminishing marginal
returns to K).
At point A, each worker has 10 units of capital and each produces 5
bags of wheat per hour. If each worker gets more capital, productivity per
worker rises and there is movement along the productivity curve
Explain (briefly) whether or not there is a movement from A to B, C or
D in the following scenarios.
a. The stock of K doubles and the L supply doubles.
b. The stock of K has increased by a greater percentage than the labour
force.
c. There has been a technological improvement.

Productivity
(bags of wheat Y/L)
5
C
A
D
B
10
Capital per
hour of labour K/L
Study the above graph (Y and K have both been divided by L to create a
'productivity curve'. More K per worker raises total production per worker
(notice the productivity curve flattens because of diminishing marginal
returns to K).
At point A, each worker has 10 units of capital and each produces 5
bags of wheat per hour. If each worker gets more capital, productivity per
worker rises and there is movement along the productivity curve
Explain (briefly) whether or not there is a movement from A to B, C or
D in the following scenarios.
a. The stock of K doubles and the L supply doubles.
b. The stock of K has increased by a greater percentage than the labour
force.
c. There has been a technological improvement.

Added by Raquel P.

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