Draw in the budget constraint

Reference no: EM133504334

Question: Consider a Ricardian model. There are two countries called Australia and NewZealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 1 hour and for a cheese is 2 hours. In New Zealand the unit labour requirement for a beer is 4 hours and for a cheese is 1 hour. Australia has an endowment of 100 hours of labour. New Zealand has an endowment of100 hours of labour

Suppose now that we have trade between the countries and the world price is 1beer for 2 cheeses. For each country draw in the budget constraint. For eachcountry label the production point on the diagram.

Reference no: EM133504334

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