ECON 2610 Lecture Notes - Lecture 7: Leontief Paradox, Pepsi Center

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The us is relatively kapital abundant and should therefore export kapital. Post wwii, attempts were made to test the new theory. The only reliable data available was from the us. Us exports were found to be more labor intensive than imports, (they should be more capital intensive. ) If you make ,000, you must generate at least that amount for the firm goods. If wages are high enough, labor will move. Inputs capital cannot move though: c vs. f capital for each is fixed, )f you want to produce more f, you can"t hire more capital, but you can offer higher wages in order to produce more. 0ly: vmpx is dtot (ex: 4/1, if itot is better ratio, then price goes up. In order to meet this price, wages and labor must rise. If we start at high wages in x and low in y (point a), then it will soon equalize (point b)

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