(Solved): Question 1 Consider the Lewis model of dual economy. In the following diagram, labour unit is tak ...

Question 1 Consider the Lewis model of dual economy. In the following diagram, labour unit is taken on the horizontal axis and marginal product of labour on the vertical axis. Going right from

gives modern sector employment and going left from

gives rural sector employment. The curve

is the marginal product curve of rural sector and wage

is wage paid in the modern sector. The curve

is the modern sector marginal product curve in period 1 . For the following questions, you can draw additional diagrams if needed. (a) [4 points] Consider period 1. Determine the amount of labour the modern sector firm employs, the total output, cost of labour and its profit in period 1 . (b) [5 points] Briefly explaining the process of capital accumulation, in the diagram determine what happens (in terms of marginal product, labour employment in the two sectors) in a future period T that corresponds to the "turning point" of the economy. (c) [5 points] Determine what happens (in terms of marginal product, labour employment in the two sectors) in a future period

that is after the period

of turning point. Please draw the diagram as well thank you.