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Stolper-samuelson theorem

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Reference no: EM132262282

Suppose the home country produces cars and tractors. Consider the following data for the Home country:

Cars: Sales revenue = PcQc=300

Payments to labor = WLc=140

Payments to capital = RKc=160

Percentage increase in the price = ? Pc/Pc=10%

Semiconductors: Sales revenue = PsQs=300

Payments to labor = WLs=150

Payments to capital = RKs=150

Percentage increase in the price = ? Ps/Ps=0%

a. Which industry is capital-intensive?

b. Given the percentage changes in output prices in the data provided, calculate the percentage change in the rental on capital.

c. How does the magnitude of this change compare with that of labor?

d. Which factor gains in real terms, and which factor loses? Are these results consistent with the Stolper-Samuelson theorem?

Reference no: EM132262282

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