Ricardian Model

Q1:Consider a Ricardian model with two goods: apple and shirts. Suppose that the Home production

possibility frontier takes the functional form Qapple = 300Qshirt, and the Foreign production possibility

frontier takes the form Qapple = 400 0.5Qshirt.

Now suppose in addition to the information in Question 1, we know that in the no-trade equilibrium,

consumers in Home demand 200 apples and consumers in Foreign demands 150 apples.

(a) Draw Home's export supply curve, with relative price on y-axis and quantity on x-axis.

Label the axis carefully: for Home's export supply curve, which good's relative price should be on

y-axis?

(b)Add Foreign's import demand curve to the diagram so that the world relative price is

between the two countries' no-trade relative prices. You don't need to label the world relative price

and trade quantity.

(c) Suppose the number of workers in Home were to double. How would this change shift

Home's export supply curve?