Show values associated with any horizontal segments

Reference no: EM133711147

Question: Consider a Ricardian world with two countries (Home and Foreign) and 5 goods (A; B; : : : ; E): The unit labour requirements for each good are listed in the following table:

aLi a
Li
A 1 10
B 8 40
C 3 18
D 8 12
E 12 24

(a) Sketch the shape of the Relative Demand for Labour. Explain the shape of this function. Show values associated with any horizontal segments.

(b) If RS = RD at w w = 4; what goods are produced at home and what goods are produced in the foreign market? What is the pattern of trade? (Identify exports and imports of each country).

(c) When the relative wage is w w = 3, what is the relative price of good A to good E; PA
PE
T
when there is trade. ConÖrm that the relative price of these two goods sits between the autarky relative prices in home and foreign.

Reference no: EM133711147

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