1 ) Krugman, Solow, and Asia’s “Miracle” (30 points) “Popular enthusiasm about A

Question

1)   Krugman, Solow, and Asia’s “Miracle” (30 points)

“Popular enthusiasm about Asia’s boom deserves to have some cold water thrown on it. Rapid Asian growth is less of a model for the West than many writers claim, and the future prospects for that growth are more limited than almost anyone now imagines.”

                      -Paul Krugman, 1994

(30 points) Can Krugman’s view be justified by economic theory? Please USE THE SOLOW GROWTH MODEL (with technological change) to demonstrate and explain the effect of an increase in savings (and therefore investment) on:

growth rate of output per worker in the short run (10 points)

growth rate of output per worker in the long run (10 points)

level of output per worker in the long run (10 points)

For full credit, please illustrate how the growth rate of output per worker and the level of output per worker evolve over time.

Explanation / Answer

an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. That is, the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. One can also refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. Utility is then a device to represent preferences rather than something from which preferences come.[1] The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles.[2]

There are infinitely many indifference curves: one passes through each combination. A collection of (selected) indifference curves, illustrated graphically, is referred to as an indifference map.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.