Podcast
Questions and Answers
What role does savings from the subsistence sector play according to the Lewis model?
What role does savings from the subsistence sector play according to the Lewis model?
- It is irrelevant to the modern sector's capital needs.
- It leads to an immediate increase in demand for capital.
- It is crucial for meeting the modern sector's capital requirements. (correct)
- It reduces the modern sector's capital needs.
Which statement accurately reflects a criticism of the Lewis model in the context of less developed countries?
Which statement accurately reflects a criticism of the Lewis model in the context of less developed countries?
- The model does not consider the impact of modern sector growth.
- The model assumes subsistence sector wages are predominantly high.
- The assumption that wages in the subsistence sector are low may not be valid. (correct)
- The model suggests that technological advancements are insignificant.
How can technological improvement in the subsistence sector impact economic growth, according to the Lewis model?
How can technological improvement in the subsistence sector impact economic growth, according to the Lewis model?
- It creates dependency on modern sector investment.
- It leads to a decline in total production capacity.
- It only benefits the subsistence sector with no effect on the modern sector.
- It fosters growth in both the subsistence and modern sectors. (correct)
What is a likely outcome of surplus earnings from the subsistence sector in less developed countries according to the Lewis model?
What is a likely outcome of surplus earnings from the subsistence sector in less developed countries according to the Lewis model?
What is one implication of the Lewis model for less developed countries' economic strategies?
What is one implication of the Lewis model for less developed countries' economic strategies?
Study Notes
Lewis Model's Application in Less Developed Countries
- The Lewis model, initially designed for developed countries, may not be directly applicable to less developed countries.
- Technological Improvement: Technological improvements in the subsistence sector (e.g., agriculture) can lead to growth in both the subsistence and modern sectors.
- Savings and Capital: Savings from the subsistence sector are crucial for the modern sector's capital needs.
- Surplus and Reinvestment: Surplus earned from the subsistence sector may not be immediately reinvested into the modern sector.
- Modern Sector Growth: Capital sourced from the subsistence sector can be utilized by the modern sector.
- Criticism of the Model: The assumption of low wages in the subsistence sector of developing countries may not hold true.
- Empirical Evidence: Empirical studies suggest that wages in the subsistence sector of some developing countries can be relatively high.
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Description
Explore the application of the Lewis model in less developed countries, addressing its limitations and criticisms. The quiz discusses how technological improvements, savings, surplus reinvestment, and empirical evidence challenge the model's assumptions. Delve into the nuances of the modern and subsistence sectors in developing economies.
