Find the autarky relative price of fish in both countries (i.e., the price of fish divided by

Question:

Find the autarky relative price of fish in both countries (i.e., the price of fish divided by the price of wheat), and draw the typical worker's budget line in both countries.
Consider the following model of trade between Iceland and Finland. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: fish and wheat. Consumers always spend one fifth of their income on fish and the remainder on wheat. The only factor of production is labor. Each Icelandic worker can produce 1 unit of fish or 1 unit of wheat per unit of time, while each Finnish worker can produce 2 units of fish or 4 units of wheat per unit of time. There are 1 million workers in Iceland and 1.5 million in Finland.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: