1. Heckscher-Ohlin Model: Suppose that a free-trade equilibrium exists in a two-country, two-good, two-factor world. Assume that the two goods, chemicals (6') and electronic appliances (E), both employ capital (K) and labor (L), and that both factors are perfectly mobile across sectors. Also assume that: ' The U5 is relatively capital-abundant " Mexico is relatively labor-abundant. Chemicals are relatively capital-intensive. Electronic appliances are relatively laborintensive. Assume that tastes and technologies are identical in the two countries. (a) On the graph below, sketch the relationship between relative product price, relative factor price and relative factor use in each industry in the U5 and Mexico. (Under the assumption of identical technologies, the same curves can be used to describe the relationships in both the US and Mexico.) wage-rental m #0 (iv/r) Electronics Chemicals (PE/ P 6) (UK)