Suppose that Px= aLX * w + aKX * r = 60 * w + 40 * r and that Py = aLY * w + aKY * r = 75 * w + 25 * r.
a) If Px=Py=100, what are the equilibrium values for the wage rate and the rental rate?
b) If Py rose to 120, what would be the new equilibrium values of w and r.
c) After the change in part b, would worker's wages buy more or less good X? More or less good Y? Would capital-owners' rent buy more or less good X? More or less good Y? Have real wages risen or fallen? The real rental rate?
a) If Px=Py=100, what are the equilibrium values for the wage rate and the rental rate?
b) If Py rose to 120, what would be the new equilibrium values of w and r.
c) After the change in part b, would worker's wages buy more or less good X? More or less good Y? Would capital-owners' rent buy more or less good X? More or less good Y? Have real wages risen or fallen? The real rental rate?