There are two commodities: X and Y. The production of 100 units of X takes 200 units of present labor and 200 units of past labor (which in turn includes 100 units of past labor one year ago and 100 units of past labor two years ago).
There are two commodities: X and Y
Ricardo used numerical examples to illustrate the calculation of natural prices. Consider the following numerical example:
There are two commodities: X and Y.
The production of 100 units of X takes 200 units of present labor and 200 units of past labor
(which in turn includes 100 units of past labor one year ago and 100 units of past labor two years ago).
The production of 100 units of Y takes 100 units of present labor and 300 units of past labor
(which in turn includes 100 units of past labor one year ago, 100 units of past labor two years ago, and 100 units of past labor three years ago).
For this numerical example, answer the following questions:
a) What is the relative labor ratio between the two commodities (using the total labor embodied in one unit of X divided by the total labor embodied in one unit of Y)?
b) Suppose wage rate is $1 per unit of labor and profit rate is 50%,
what is the price per unit of X and what is the price per unit of Y?
What is the relative price ratio between the two commodities
(using the price per unit of X divided by the price per unit of Y; keep two decimal places for your results)?
c) Suppose wage rate is $2 per unit of labor and the profit rate is 25%, what is the price per unit of X and what is the price per unit of
Y? What is the relative price ratio between the two commodities
(using the price per unit of X divided by the price per unit of Y; keep two decimal places for your results)?
d) Now suppose the profit rate is 0% (regardless of what the wage rate would be)
what should be the relative price ratio between the two commodities?
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