Malthusian economy

Question 1

What was the trend for income and population before the industrial revolution?

Answer 1

Static (Malthusian trap)

Question 2

3 assumptions of Malthusian trap

Answer 2

1. As income/head rises birth rate rises 2. As income/head rises death rate falls 3. As population rises income/head falls

Question 3

Why does higher population = lower income/head (3)

Answer 3

1. Production= Labour + Land (Which is fixed) 2. Due to LDR each additional labour provides less MP 3. WR=Output/head

Question 4

What does the malthusian equillibrium look like?

Answer 4

Question 5

Effect of increased birth rate?

Answer 5

Question 6

Ricardo’s iron law of wages?

Answer 6

real wages must always return to substistence levels

Question 7

What do classical economists blame the stagnation on

Answer 7

Poor institutions e.g. lack of property rights

Question 8

What is the major flaw with the malthusian model

Answer 8

Can’t explain why the industrial revolution occured