Show the effect of more labour on the economy

Reference no: EM13724365

Consider a country that is in autarky. X is the labour intensive good and Y is the capital intensive good. Draw a hypothetical production possibilities frontier (PPF). Suppose the country experiences immigration. Show the effect of more labour on the economy using PPF as well as production functions in K-L space.

That is, show what would happen to prices, wage-rental ratio, production and capital intensity of the goods.

Tip: Labour is more important to labour intensive goods than capital intensive goods.

Reference no: EM13724365

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