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second part of this: https://www.coursehero.com/qa/wait/49185108/?question_id=49185108 the relative price of yuzu decreases, what happens to the allocation of labor between the two sectors? d. Write one
second part of this: https://www.coursehero.com/qa/wait/49185108/?question_id=49185108
the relative price of yuzu decreases, what happens to the allocation of labor between the two sectors? d. Write one equation showing the ratio of production (Qv /Qp) using the production functions. How does a decrease of (Ly/ Lp) change the relative quantities (QY 'QF) supplied? [ You do not need to explicitly solve for LYLE just determine the relationship] Draw the production possibilities frontier (with Of on the vertical axis) and show how the change in prices affects the quantities of production. e. Try to obtain now the relative demand (Cv /CF) as a function of the relative price (PW/PF). You don't need to write the whole consumer maximization problem, just remember that the condition for optimal consumption choice is that the marginal rate of substitution between the two goods (the ratio of the marginal utility of Cy to the marginal utility of C) should be equal to the relative price [and that the derivative of log x is IA]- f. Assume that the Home country is trading in international markets; its economy is big enough to affect the world relative supply (RS) and demand (RD); consumers around the world have the same preferences (so the world relative demand coincide with the country's relative demand); and at the current world prices, the country is exporting fish (and importing yuzu). Draw the RS-RD graph showing both the country's RS and the world RS, and indicate the equilibrium relative price (under our assumptions, would it be higher or lower than the country's autarky price?). g. What happens to the welfare of workers and capital owners in both sectors at Home with this initial transition to trade? Answer the question by examining the changes in wages and rental prices relative to the good prices, c.g. (W/Py, W/Pr, Rx/Py, Rw/Pv, KK/PF; RM /PP) Suppose that the Home country experiences technological progress in the fish industry, namely some innovation that permanently increases Ar (total factor productivity in fish production). h. Show graphically how that would affect the production possibility frontier. i. How will that affect the relative supply and the relative demand at the initial international price? [again, first a logical/intuitive explanation; then with the equations in 1b-c; then graphically] j. How will the terms of trade of the country change as a result? k. What is the effect on relative supply, relative demand, and terms of trade if the increase in productivity did not happen in Home country, but in the yuzu industry of other countriesStep by Step Solution
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