Question

Consider the economies of Hermes and Tralfamadore, both of which produce glops of gloop using only tools and workers. Suppose that, during the course of 30 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same.

Answer 1

Missing Part of Question

Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2012 and 2042.

Hermes

Year (2002)

Physical Capital: 11 tools per worker

Labour Force: 30 workers

Output: 1,800 Gobs of goo

Productivity:__________

Year (2042)

Physical Capital: 16 tools per worker

Labour Force: 30 workers

Output: 2,160 Gobs of goo

Productivity:__________

Tralfamadore

Year (2002)

Physical Capital: 8 tools per worker

Labour Force: 30 workers

Output: 900 Gobs of goo

Productivity:__________

Year (2042)

Physical Capital: 13 tools per worker

Labour Force: 30 workers

Output: 1,620 Gobs of goo

Productivity:__________

Answer:

The Complete Table is as follows

Hermes

Year (2002)

Physical Capital: 11 tools per worker

Labour Force: 30 workers

Output: 1,800 Gobs of goo

Productivity:60 workers

Year (2042)

Physical Capital: 16 tools per worker

Labour Force: 30 workers

Output: 2,160 Gobs of goo

Productivity:72 workers

Tralfamadore

Year (2002)

Physical Capital: 8 tools per worker

Labour Force: 30 workers

Output: 900 Gobs of goo

Productivity:30 workers

Year (2042)

Physical Capital: 13 tools per worker

Labour Force: 30 workers

Output: 1,620 Gobs of goo

Productivity:54 workers

Explanation:

We calculate the productivity of both Hermes and Tralfamadore by dividing Output by Labor Force. This is given by:

Productivity = Output/Labour Force

For Hermes

In 2002

Productivity = 1800/30 = 60 workers

In 2042,

Productivity = 2160/30 = 72 workers

For Tralfamadore

In 2002

Productivity = 900/30 = 30 workers

In 2042,

Productivity = 1620/30 = 54 workers