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how to slove this question? which is about The Heckscher-Ohlin model of trade. Consider the typical HOS setting: two goods, 1 and 2, are produced

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how to slove this question? which is about The Heckscher-Ohlin model of trade.
image text in transcribed
Consider the typical HOS setting: two goods, 1 and 2, are produced using two production factors: labor L and capital K. y is the production of good '6, and Kr and Li are respectively the amounts of capital and labor used in sector 3'. Demand functions write: y] = 5'?sz ,8 ,2 292 2 K2 L2 Good 1 is chosen as the numeraire. p is the price of good 2 in units of good 1. y is the national income in units of good 1. w is the wage and r is the capital reward, both expressed in units of good 1. k;- is the capital intensity of sector 3': k5 : K1- /Li. 1. Write the relationships that characterize the optimal allocations of ressources. Explain the different steps. Express 191 as a function of w/r and k2 as a function of 10/1". Illustrate graphically. 2. Write the relationships between p and 10/1". Illustrate graphically. 3. The country is endowed with K : 800 units of capital and with L : 400 units of labor. What are the limit values of w/T? What are the limit values of 161 and k2? What are the values of p for which the countries specializes entirely? Explain. Illustrate graphically. 4. Let b be the share of national income, in terms of good 11 allocated by consumers to the consumption of good 1: d1 : by. y is the national income in terms of good 1 (0

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