Hypothesizing Technological Adoption
The table below shows a simplified index of the cost of labor relative to the cost of energy in several cities during the early 1700s (a higher index means labor was more expensive compared to energy).
| City | Relative Cost Index |
|---|---|
| London | ~3.5 |
| Paris | ~1.8 |
| Beijing | ~0.2 |
Based on this data, formulate a hypothesis that explains why a new invention that reduces labor needs but increases energy consumption would be profitable in one of these cities but not another. Your hypothesis must identify the key economic incentive driving this difference.
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The provided chart displays the cost of labor relative to the cost of energy in various cities during the early 1700s. Based on this information, a business owner would have had a greater financial incentive to replace workers with energy-powered machines in Paris than in London.
An entrepreneur in the early 1700s is deciding on a production strategy. The table below shows a simplified index of the cost of labor relative to the cost of energy in three different cities (a higher index means labor is more expensive compared to energy).
City Relative Cost Index London 3.5 Paris 1.8 Beijing 0.2 Match each city with the most economically rational production strategy for that location.
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