Suppose Canada has 100 units of labor available, that there are 2 goods, food products, and cars, and that Canada’s unit labor requirements are 4 for food products and 5 for cars. Japan has 1000 units of labor, and unit labor requirements are 2 for food products and 2 for cars. The relative price of the food product is 4/5 in Canada, 1 in Japan. The relative price of car is 5/4 in Canada, 1 in Japan.
1. Suppose demand is such that Qc/Qf=2*(Pf/Pc) What will be the equilibrium relative price?
2. What will be the pattern of specialization in question 1?
Suppose Canada has 100 units of labor available, that there are 2 goods, food products, and...
Heckscher-Ohlin model Country A produces cellphone (C) and food (F) with capital and labor. Both sectors are perfect competitive. Capital (K) and labor (L) are not substitutable with each other. Thus, unit capital requirement and unit labor requirement are fixed. ??? = 3, ??? = 1, ??? = 2, ??? = 4, where ??? is the number of units of K-capital required to produce and unit of C-cellphone. a. Which sector is relatively capital intensive? Which sector is relatively labor...
Problem 1 A country (”Home”) is populated with 300 workers who produce either food (F) and/or clothing (C). Each food worker produces 6 units of food and each clothing worker produces 3 units of clothing. The preferences of the consumers over food and clothing are represented by the utility function: u(DF , DC) = (DF ) 2/3 (DC) 1/3 1) Assuming that at the optimum, consumers set their marginal rate of substitution, MRSDF ,DC , to the relative price, i.e.,...
Consider a small open economy (e.g. the Netherlands) producing two goods, clothing and food. The clothing industry uses capital (K) and labor (LC) as inputs, while the food industry uses land (La) and labor (LF ) as factors of production. The production technologies for the two industries are given by QC = K ¼ LC 3/4 ; QF = La1/2L F 1/2 . Also, the country is endowed with 216 units of capital, 360 units of labor, and 9 units...
I need help with this exercise. Two countries, Canada and Indonesia, produce two goods, Computers (C) and rice (R) with labour (L) as the only input. The quantities of input required to produce a unit of each output are as follows: Computers Rice Indonesia 8 1 Canada 10 2 L in Canada is = 30, in Indonesia is =40. i) Sketch the PPF in each country (with QC on the horizontal axis). Indicate the intercepts and slope of the PFF...
Country A has 16,000 units of labor and can produce 2 goods, manufactures and food. A’s producers take 2 units of labor to produce one unit of manufactures and 8 units to produce one unit of food. Country B has 36,000 units of labor and takes 6 units of labor to produce one unit of manufactures and 5 units to produce one unit of food. What is the price of manufactures in terms of food at which A and B...
Consider a simple economy with two goods, clothing and food, and two consumers Jacob and Will. Jacob is endowed with 100 units of clothing and 100 units of food. Will is endowed with zero units of clothing and 200 units of food. Suppose that Jacob’s optimal demand for clothing is C = 50 + 50PF / PC where PF is the price of food and PC the price of clothing. Will’s optimal demand for clothing is C = 100PF /...
3. Home has 1.200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3. while in banana production it is 2. Foreign has 800 units of labor available. Foreign's unit labor requirement in apple production is 5. while in banana production it is 1. a Graph the production possibility frontier for Home and the production possibility frontier for Foreign Please put Apples on the y axis. Now suppose world...
2. a. The home country is endowed with QF units of food and QC units of clothing. Use an indifference curve diagram to show this economy freely trading such that they export clothing and import food. On your diagram, indicate the endowment and consumption points as well as exports and imports, and the world relative price. Note: Only show the free trade equilibrium in part a. Do not show the autarky equilibrium. b. On your diagram, show what would happen...
Suppose two countries, Grainland and Carsland, use only capital and labor to produce two goods, Grain (G) and Cars (C). Grainland has 2,050 units of capital and 916 units of labor, and Carland has 816 units of capital and 270 units of labor. In Carsland, there are 366 units of capital and 135 units of labor employed in the Grain industry. In Grainland, there are 926 units of capital and 618 units of labor employed in the Grain industry.A. Which...