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South Africa offers lucrative rates of return for Botswanian investors. As a result, in 2019 South Africa accounted for a 50 per cent increase in
South Africa offers lucrative rates of return for Botswanian investors. As a result, in 2019 South Africa accounted for a 50 per cent increase in its capital stock. Assume that the capital and labour market are in equilibrium. Using an Edgeworth box and the Rybczynski proposition describe the effects of an increase in capital stock on the production of Chakalaka and Beer. South Africans and Botswanaans enjoy Chakalaka and Beer. Suppose that these are the only two products they consume and produce with Chakalaka being relatively more labour intensive and Beer being relatively more capital intensive in the production process ( ab = 0.8 and ac = 0.2. Suppose that, as a result of the Southern African Customs Union, all impediments or barriers to trade are lifted, such that these countries can freely trade both goods without any costs
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