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Which sector is more labor intensive

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Reference no: EM131691733

Now, think of the HO model. We have two countries and two sectors; manufacturing and agriculture, and we have two factors of production that can move freely between sectors in a country; labor and capital. The following information is for the home country:

The sales revenue for the manufacturing sector is $120, the earnings of labor in the manufacturing sector is $60 and the earning of capital in the manufacturing sector is also $60.

The sales revenue in the agricultural sector is $120, the earnings of labor in the agricultural sector is $70 and the earning of capital in the agricultural sector is $50.

a) Which sector is more labor intensive? How did you find this out?

When the home country opens up to trade, the relative price of manufactures increases by 10%, while the price of the agriculture good doesn't change.

b) What is the percentage change in wages?

c) What is the change to the rental paid to capital?

Reference no: EM131691733

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