Econ 154 Problem Set 1

Econ 154 Problem Set 1 - Questions: 1. The Malthusian Model...

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Questions: 1. The Malthusian Model of population growth states that a population grows at a rate proportional to the present population (dp/dt = k*p). This theory is predicated on the assumption that a population grows as a result of the reproduction of members of the populations (thus, the rate of population increase is proportional to the size of the present population). However, the model fails to account for other factors which can affect the rate of reproduction. For instance, during and immediately after World War II, America experienced a “baby boom” due to the feelings aroused by impending departure, the looming threat of death and long-awaited returns. Additionally, the basic Malthusian Model fails to account for immigration and emigration as factors affecting population size. Despite its shortcomings, the Malthusian Model is effective in describing the growth of populations, especially if it is applied correctly (only to eras with a relatively constant k). 2. The model in question would be used to answer the question: “What is the effect of job-search websites on the long-run average unemployment rate?” In designing this model, the economic setting is the set of all unemployed people seeking work and the set of all employers seeking employees. The behavior of the economic actors is assumed to be such that the employees will work at an available job and the employers will hire an available worker (in both instances, the markets are assumed to be perfectly competitive, implying no product discrepancies). With these assumptions in place, it follows that a medium (such as a job-search website) that facilitates the synergy of unemployed and employer in forging a bond of employment will reduce frictional unemployment. Since long-run unemployment is defined as frictional unemployment plus structural unemployment, this change will also lower the long-run unemployment rate. While the internet is in fairly widespread use in the United States, many of its features, including job-search websites are under-utilized. Thus, there would be sufficiently large numbers of unemployed seeking work who
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Econ 154 Problem Set 1 - Questions: 1. The Malthusian Model...

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