Question: If instead of the situation given in Problem, the price of manufacturing were to fall by 10%, would landowners or capital owners be better off? Explain. How would the decrease in the price of manufacturing affect labor? Explain.
Problem: Use the information given here to answer the following questions:
Holding the price of manufacturing constant, suppose the increase in the price of agriculture is 10% and the increase in the wage is 5%.
a. Determine the impact of the increase in the price of agriculture on the rental on land and the rental on capital.
b. Explain what has happened to the real rental on land and the real rental on capital.