suppose there are two countries (a capital-abundant country and a labor abundant country) and 2 goods (labor intensive- good x and capital intensive good y). Two countries have identical demand for these goods and are considering forming a free trade agreement. However, while this agreement received support from most voters in country A, many voters in country B were concerned the agreement will widen the income inequality in country B.

- which country is labor abundant and which one is capital abundant?

- use a graph to demonstrate how income inequality is likely to widen in country B after the free trade agreement

- what policies could be used to address the widening income inequality in country B?