Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 1 hour and for a cheese is 2 hours. In New Zealand the unit labour requirement for a beer is 4 hours and for a cheese is 1 hour. Australia has an endowment of 100 hours of labour. New Zealand has an endowment of 100 hours of labour.

the budget constraint line is x+y=100

the PPF of Australia is 2x+y=100

the PPF of New Zealand is x+4y=100

opportunity cost price ratio

beer Aus =0.5, NZ= 4

cheese Aus=2, NZ=0.25

a) whilst considering the price ratio's above we will assume from here on that the price of beer is $2 and the price of cheese is $1. If 50 cheeses are consumed in New Zealand, how many beers will be consumed in New Zealand? Now if 20 cheeses are consumed, what will be the change in the consumption of beer?

b) For both countries calculate the hourly wage rate (with international trade)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Morality Of Economic Behaviour Economics As Ethics

Authors: Vangelis Chiotis

1st Edition

1351168878, 9781351168878

More Books

Students also viewed these Economics questions

Question

How can data communications networks affect businesses?

Answered: 1 week ago

Question

Explain the principles of delegation

Answered: 1 week ago

Question

State the importance of motivation

Answered: 1 week ago

Question

Discuss the various steps involved in the process of planning

Answered: 1 week ago

Question

What are the challenges associated with tunneling in urban areas?

Answered: 1 week ago

Question

What are the main differences between rigid and flexible pavements?

Answered: 1 week ago