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onsider two countries, Home and Foreign, both of which are able to produce two goods: good 1 and good 2, using the same technologies. The
onsider two countries, Home and Foreign, both of which are able to produce two goods: good 1 and good 2, using the same technologies. The production of both goods uses capital and labor in fixed proportions. In particular, the units of each input needed to produce one unit of output are given by: capital labor good 1 12 3 good 2 3 9 Home is endowed with 630 units of capital and 680 units of labor available, whereas Foreign is endowed with 530 units of capital and 460 units of labor. Consumers like to consume both goods and have the same preferences in both countries. Assume that the relative demand for good 1 takes the form: D1/D2 = 1/(P1/P2) Assume that the countries are closed to trade. Compute the quantities of labor and capital employed in each country in the production of each good in the closed economy equilibrium Enter the amount of labor employed by Home in the production of good 1 (with two decimal digits)
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