Please note: for part i. of the question - the cost of copying is changing for the FOLLOWERCOUNTRY (Country 2). since a new technology was invented-thus the farther the follower lags behindcopy. Alternatively, we could say that what affects the cost of imitation is the timethe leader, the older (and thus easier to copy) are the technologies that the followerTo formulate this assumption mathematically, we say that , is a function ofthe ratio of technology in Country 1 to technology in Country 2, where the func-wants to imitate.tion that describes the relationship is denoted as c():Mc =We make three assumptions about this "cost of copying" function. First, we as-sume that it is downward sloping-that the cost of copying falls as the technol-ogy gap between the two countries increases (i.e., as the ratio of technology inCountry 1 to technology in Country 2 increases). Second, we assume that as theratio of A₁/A₂ goes to infinity, the cost of copying falls to 0. In other words, if thegap in technology were infinitely large, then imitation would be costless. Finally,we assume that as the ratio of A₁/A₂ approaches 1, the cost of copying approachesthe cost of invention. This means that if the follower country is very near thetechnology leader, it gets little benefit from copying technology rather than inventing its own. (The cost-of-copying function is not defined if A₁/A₂ is less than1 because in this case, there would be nothing for Country 2 to copy.) Figure 8.2shows what the cost-of-copying function might look like.FIGURE 8.2Cost of Copying for the Follower CountryCost of copying, c14₁c(A₁/A₂)A₁/A₂8.3 Modeling the Relationship between Technology Creation and GrowthFIGURE 8.3Steady State in the Two-Country ModelGrowth rate of technology, ATAILPiYAZL(A₁/A₂)ssÂ₁YA,2·L₂.HeA₁/A₂Given a value of μc, the rate of technology growth in Country 2 is given by anequation in the same form as the growth rate of technology in Country 1:Â₂ =We are now in a position to look at the steady state of the model. The keyinsight is that, in the steady state, the two countries will grow at the same rate.Figure 8.3 shows why this is the case: It graphs the growth rate of A in each coun-try as a function of A₁/A2, the ratio of technology in the leader country to technol-ogy in the follower country. If this ratio were 1-that is, if Country 2 had the samelevel of technology as Country 1-then we would know that technology would begrowing more quickly in Country 1 than in Country 2. The reason is that, in thiscase, the two countries would have the same cost of creating new technologies,whereas Country 1 has a higher value of YA than does Country 2. By contrast, ifthis ratio were infinite, then the cost of acquiring new technologies in Country 2would be 0, and Country 2 would be experiencing faster technological growth thanCountry 1. Thus, at some ratio of A₁/A₂ between 1 and infinity, the two countrieswill have the same growth rates of A, and the ratio of the levels of technology in thetwo countries will remain constant. This will be the steady state. Note also that thissteady state is stable: If the ratio A₁/A₂ starts off above the steady state, then A₂ willgrow faster than A₁, and the ratio will fall. If the ratio starts off below the steadystate, the opposite will occur. Consider figure 8.2 and 8.3 on pages 218 and 219 from the textbook. . Consider each of the followingscenarios separately.11.ISuppose in the leader country (Country 1) there is a rise in cost of copying at every level oftechnology gap (A1/A2), possibly caused by factors influencing the cost of copying other thantechnology gap (possibly education). Show how these graphs will be affected as a result of thisnew change. On your well labeled graphs you must clearly indicate the shift of the relevantcurve (s) and the direction of the shift. Explain your answer in 2-3 sentences.Suppose pandemic reduces population growth decreasing the number of workers available toboth the countries by same amount. Show how these graphs will be affected as a result of thisnew change. On your well labeled graphs you must clearly indicate the shift of the relevantcurve (s) and the direction of the shift. Explain your answer in 2-3 sentences.

Question

Please note: for part i. of the question - the cost of copying is changing for the FOLLOWERCOUNTRY (Country 2). since a new technology was invented-thus the farther the follower lags behindcopy. Alternatively, we could say that what affects the cost of imitation is the timethe leader, the older (and thus easier to copy) are the technologies that the followerTo formulate this assumption mathematically, we say that , is a function ofthe ratio of technology in Country 1 to technology in Country 2, where the func-wants to imitate.tion that describes the relationship is denoted as c():Mc =We make three assumptions about this &#34;cost of copying&#34; function. First, we as-sume that it is downward sloping-that the cost of copying falls as the technol-ogy gap between the two countries increases (i.e., as the ratio of technology inCountry 1 to technology in Country 2 increases). Second, we assume that as theratio of A₁/A₂ goes to infinity, the cost of copying falls to 0. In other words, if thegap in technology were infinitely large, then imitation would be costless. Finally,we assume that as the ratio of A₁/A₂ approaches 1, the cost of copying approachesthe cost of invention. This means that if the follower country is very near thetechnology leader, it gets little benefit from copying technology rather than inventing its own. (The cost-of-copying function is not defined if A₁/A₂ is less than1 because in this case, there would be nothing for Country 2 to copy.) Figure 8.2shows what the cost-of-copying function might look like.FIGURE 8.2Cost of Copying for the Follower CountryCost of copying, c14₁c(A₁/A₂)A₁/A₂8.3 Modeling the Relationship between Technology Creation and GrowthFIGURE 8.3Steady State in the Two-Country ModelGrowth rate of technology, ATAILPiYAZL(A₁/A₂)ssÂ₁YA,2·L₂.HeA₁/A₂Given a value of μc, the rate of technology growth in Country 2 is given by anequation in the same form as the growth rate of technology in Country 1:Â₂ =We are now in a position to look at the steady state of the model. The keyinsight is that, in the steady state, the two countries will grow at the same rate.Figure 8.3 shows why this is the case: It graphs the growth rate of A in each coun-try as a function of A₁/A2, the ratio of technology in the leader country to technol-ogy in the follower country. If this ratio were 1-that is, if Country 2 had the samelevel of technology as Country 1-then we would know that technology would begrowing more quickly in Country 1 than in Country 2. The reason is that, in thiscase, the two countries would have the same cost of creating new technologies,whereas Country 1 has a higher value of YA than does Country 2. By contrast, ifthis ratio were infinite, then the cost of acquiring new technologies in Country 2would be 0, and Country 2 would be experiencing faster technological growth thanCountry 1. Thus, at some ratio of A₁/A₂ between 1 and infinity, the two countrieswill have the same growth rates of A, and the ratio of the levels of technology in thetwo countries will remain constant. This will be the steady state. Note also that thissteady state is stable: If the ratio A₁/A₂ starts off above the steady state, then A₂ willgrow faster than A₁, and the ratio will fall. If the ratio starts off below the steadystate, the opposite will occur. Consider figure 8.2 and 8.3 on pages 218 and 219 from the textbook. . Consider each of the followingscenarios separately.11.ISuppose in the leader country (Country 1) there is a rise in cost of copying at every level oftechnology gap (A1/A2), possibly caused by factors influencing the cost of copying other thantechnology gap (possibly education). Show how these graphs will be affected as a result of thisnew change. On your well labeled graphs you must clearly indicate the shift of the relevantcurve (s) and the direction of the shift. Explain your answer in 2-3 sentences.Suppose pandemic reduces population growth decreasing the number of workers available toboth the countries by same amount. Show how these graphs will be affected as a result of thisnew change. On your well labeled graphs you must clearly indicate the shift of the relevantcurve (s) and the direction of the shift. Explain your answer in 2-3 sentences.

Accepted Answer

The social science of economics focuses on the creation, exchange, and consumption of goods and…