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purplemuskrat578Lv1

28 Sep 2019

Need help with the Specific Factor Model in international trade.

Use the information below for Home:

Manufacturing:

Sales Revenue = P_MQ_M = 120

Payments to labor - WL_M = 80

Payment to capital = R_KK = 40

Agriculture:

Sale Revenue = P_MQ_M = 120

Payments to labor = WL_M = 30

Payments to land = R_KK = 90

a) Due to trade, the price of the manufactured commodity (P_M) increases by 10%, the price of the Agricultural commodity (P_A) remains the same, and Wages increase by 8%.

What is the impact on the rental on capital and the rental on land?

b) using the answer from part (a) mention who will be in favor of trade and who will oppose it? How is this result different from the result in the Ricardian model?

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Chika IlonahLv10

28 Sep 2019

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