Analyze the following scenario and explain the impact of the change on the real wage per worker and the overall distribution of income.

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To illustrate how the WS-PS model explains income distribution, a simple economy is imagined. This economy consists of 10 identical firms, each owned by a single employer, and a workforce of 80 identical employees.

Illustrative Economy for the WS-PS Income Distribution Model

In a simplified economy with 10 identical firms and a total workforce of 80 people, suppose that 60 people are employed. Each employed person produces 1 unit of output and receives a real wage of 0.7 units of output. The owners of the firms receive the remaining output as profit. What is the share of total output received by the entire worker group (both employed and unemployed)?

Analyze how this technological improvement affects the distribution of total income between the group of firm owners and the entire group of workers (both employed and unemployed). Support your analysis with calculations showing the income shares before and after the change.

Productivity and Income Distribution

In a simplified economy with 10 identical firms and a workforce of 80 people, total output is 100 units. The owners of the firms collectively receive 30% of the total output as profit. If 70 people are employed, what is the real wage for each employed worker?

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