Manufacturing:
Sales revenue the price of manufacturing multiplied by the quantity of manufacturing, is 150
Payments to labor the wage multiplied by the quantity of labor employed in manufacturing, are 100
Payments to capital the rental rate on capital multiplied by the quantity of capital used in manufacturing, are 50
Agriculture:
Sales revenue the price of agriculture multiplied by the quantity of agriculture, is 150
Payments to labor the wage multiplied by the quantity of labor employed in agriculture, are 50
Payments to land the rental rate on land multiplied by the quantity of land used in agriculture, are 100
Holding the price of manufacturing constant, suppose the increase in the price of agriculture is 20% and the increase in the wage is 10%.
a. Determine the impact of the increase in the price of agriculture on the rental on land and the rental on capital.
Rental on land = %
Rental on capital = %
the percentage change in rental rate on land is equal to the percentage change in the price of agriculture multiplied by the price of agriculture multiplied by the quantity of agriculture, which is the sales revenue, minus the percentage change in the wage multiplied by the wage multiplied by the quantity of labor employed in agriculture, which are the payments to labor, all divided by the rental rate on land multiplied by the quantity of land used in agriculture, which are the payments to land.
the percentage change in rental rate on land is equal to change in price in agriculture which is 20%, the sales revenuewhich is 150, the change in the wage which is 10%, the payments to labor which are 50, and the payments to land which equal 100 to 25 %
Recalling that the price of manufacturing remained constant, we get the rental on capital as:
the percentage change in rental rate on capital is equal to 0 multiplied by quantity of manufacturing minus the percentage change in the wage multiplied by the quantity of labor employed in manufacturing all divided by the quantity of capital used in manufacturing
the percentage change in rental rate on capital is equal to the percentage change in the wage multiplied by the ratio of the wage multiplied by the quantity of labor employed in manufacturing and rental rate on capital multiplied by the quantity of capital used in manufacturing
the ratio of the percentage change in rental rate on capital and the rental rate on capital is equal to minus 10 percent multiplied by 100 divided by 50 which equals minus 20 percent
the percentage change in rental rate on land is equal to the percentage change in the price of agriculture multiplied by the price of agriculture multiplied by the quantity of agriculture, which is the sales revenue, minus the percentage change in the wage multiplied by the wage multiplied by the quantity of labor employed in agriculture, which are the payments to labor, all divided by the rental rate on land multiplied by the quantity of land used in agriculture, which are the payments to land.
the percentage change in rental rate on land is equal to change in price in agriculture which is 20%, the sales revenuewhich is 150, the change in the wage which is 10%, the payments to labor which are 50, and the payments to land which equal 100 to 25 %
Recalling that the price of manufacturing remained constant, we get the rental on capital as:
the percentage change in rental rate on capital is equal to 0 multiplied by quantity of manufacturing minus the percentage change in the wage multiplied by the quantity of labor employed in manufacturing all divided by the quantity of capital used in manufacturing
the percentage change in rental rate on capital is equal to the percentage change in the wage multiplied by the ratio of the wage multiplied by the quantity of labor employed in manufacturing and rental rate on capital multiplied by the quantity of capital used in manufacturing
the ratio of the percentage change in rental rate on capital and the rental rate on capital is equal to minus 10 percent multiplied by 100 divided by 50 which equals minus 20 percent