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Question 1 Consider a simplied example of' two countries - Singapore and Indonesia producing two goods telecommunications equipment and electrical circuit apparatus. Using all its
Question 1 Consider a simplied example of' two countries - Singapore and Indonesia producing two goods telecommunications equipment and electrical circuit apparatus. Using all its resources, Singapore can produce either 5t} telecommunications equipment, or l electrical circuit apparatus. Using all its resources, Indonesia can produce either 1, telecommunications equipment, or 5, circuit apparatus. (a) Which countryi'countries hasi'have the absolute advantages and the comparative advantages in the production of'telecommunications equipment, and of electrical circuit apparatus?r Explain and show. Consider the case of constant opportunity cost. What will be the resulting patterns of trade, termsoftrade, and the aggregate production and consumption? Provide a diagram to illustrate, with telecommunications equipment on the yaais. It is found that contrary to the above, there is no complete specialisation in both Singapore and Indonesia. Instead, Singapore partially specialises in telecommunications equipment, producing 4t] units, while Indonesia partially specialises in electrical circuit apparatus, producing 4, units. Using the HeckscherDhlin theory instead of the Ricardian theory, demonstrate this observation. You are required to draw intuitive reference to the realworld context. Elaborate on the consequent trade effects, using diagrams where necessary. [Word limit: S words for part lc}
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