Assume under the Specific-Factors Model, home country export manufacturing goods to foreign country. Use the following information to answer the questions below:

Manufacturing:

Sales revenue = P _M × Q _M = 150

Payments to labor = W × L _M = 100

Payments to capital = R _K × K = 50

Agriculture:

Sales revenue = P _A × Q _A = 150

Payments to labor = W × L _A = 50

Payments to land = R _T × T = 100

Holding the price of agriculture constant, suppose the increase in the price of manufacturing is 20% and the increase in the wage is 10%.

a. Determine the impact of the increase in the price of manufacturing on the rental on land and the rental on capital. (measured in percentage change)

b. Explain what has happened to the real rental on land and the real rental on capital.