1. Suppose that goods are produced using two factors of production: land (T ) and capital (K). The production of Agricultural products (A) uses a higher T/L ratio than the production of Calculators (C). Prices of output goods are PA and PC; prices of inputs are v for the rental rate for land and r for the rental rate of capital.

(a) Show the relation between relative goods prices, relative factor prices and relative factor demands (two-quadrant diagram).

(b) The resource endowments of the countries, Home and Foreign, are described in the following table: