Suppose India and Canada trade in spices and beer. Use the following data for Canada to answer the questions:

Spices:

Sales revenue = PS x QS = $80

Payments to labor = W x LS = $80

Payments to capital = R x KS = $40

Percentage increase in the price = PS/PS = 25%

Beer:

Sales revenue = PB x QB = $80

Payments to labor = W x LB = $30

Payments to capital = R x KB = $60

Percentage increase in the price = PB/PB = 0%

a) Which industry is labor-intensive? Show with proper equation/inequality notations.

b) Find the percentage change in the rental on capital. Show with proper equation/inequality

notations.

c) Compare the magnitude of the percentage in the rental on capital in part (b) with that of

labor. Show with proper equation/inequality notations.

d) Identify the factor that benefits from trade in real terms. Which factor loses? ow with proper

equation/inequality notations.