1. Consider Figure 9.3. In which periods of U.S. history was output growth in agriculture the highest? In which periods of U.S. history was labor productivity growth in agriculture the highest? Recall that labor productivity growth is approximately equal to − . Are these generally the same periods? What factors can account for the differences between output growth rates ( ) and labor productivity growth rates ( − ) at different time periods in U.S. history? Explain.
2. Suppose that the demand curve in a competitive market is described by the following equation: = 20 − where is the quantity demanded for the good or service and P is the price.
A. If the price is currently $15, then what is the price elasticity of demand? Is this elastic, inelastic, or unit elastic? Show your work.
B. Suppose that there is a technological innovation in the production of this good or service that leads to a fall in the price of the good from $15 to $12. What specifically will happen to the total revenue available to the producers of this product due to this decrease in price? Numerically show and explain.