Who would benefit from the labour supply increase

Reference no: EM133706816

Question: Consider a typical 2 goods (Cloth and Food) 2 factor (Labour and Capital) economy. If the economy's labour supply increases (while preserving w/r and / constant) a. Rybczynski Theorem states that output of labour intensive good would increase while capital intensive good would decrease. Explain why output of both industry cannot increase simultaneously. b. Who would benefit from the labour supply increase? (hint: factor price insensitivity) c. The results of labor supply increase in Heckscher-Ohlin Model (long run, where all factors are mobile across industries) are different from the case of Specific Factors Model (short run, where some factors are "specific" in industries). Discuss why

Reference no: EM133706816

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