2. (4 points). 2 countries, Gryffindor and Slytherin, produce 2 goods, magic potions (denoted by MP) and magic wands (denoted by MW). Assume that lemon grass (denoted by G) is a factor specific to magic potions, magic oak (denoted by O) is a factor specific to magic wands, and troll labor (denoted by L) is free to move between 2 sectors.

(a) Consider Gryffindor. Holding constant the price of magic potions, suppose the decrease in the price of magic wands is 10% and the decrease in the troll wage is 5%. Determine the impact of these changes on the real rentals on lemon grass and magic oak by using information below:

Magic potions:

Magic Wands:

Sales revenue PMPQ_MP = 75 Payments to troll labor WLM_P = 50 Payments to lemon grass owners R_GG = 25

Sales revenue P_MWQ_MW = 600 Payments to labor WL_MW = 200 Payments to magic oak owners R_OO = 400

(b) How would your answer in part (a) change if the 5% decrease in the troll wage was caused by the decrease in the price of magic potions? (You do not need to calculate anything, just explain.)

2. (4 points}. 2 countries, Gry'mdor and Slytherin, produce 2 goods, magic potions (denoted by MP} and magic wands (denoted by MW}. Assume that lemon grass (denoted by G} is a factor specic to magic potions, magic oak (denoted by 0} is a factor specic to magic wands, and troll labor (denoted by L} is free to move between 2 sectors. {a} Consider Gryfndor. Holding constant the price of magic potions, suppose the decrease in the price of magic wands is 10% and the decrease in the troll wage is 5%. Determine the impact of these changes on the real rentals on lemon grass and magic oak by using information below: Mngicpom: Sales revenue PMQHP= 7'5 Payments to troll labor WLH, = 5!] Payments to lemon grass owners REG =25 Magic Wands: Sales revenue PM, = 600 Payments to labor W11\"... =21!!! Payments to magic oak owners R00 = 400 (b) How would your answer in part (a) change if the 5% decrease in the troll wage was caused by the decrease in the price of magic potions? (You do not need to calculate anythingjust explain.)