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The following table defines terms relevant to the basic Ricardian model of one factor and two goods. Relative Price of cheese, (PC/Pw) aLC = number
The following table defines terms relevant to the basic Ricardian model of one factor and two goods. Relative Price of cheese, (PC/Pw) aLC = number of labor hours needed to produce a unit of cheese in Home; a w = number of labor hours needed to produce a unit of whiskey in Home aLC # RS = a c number of labor hours needed to produce a a w unit of cheese in Foreign; a LW = number of labor hours needed to produce a unit of whiskey in Foreign; Pc = the price per pound of cheese on world . . . . . markets; PW = the price per gallon of whiskey on world a c markets. The figure to the right shows the world relative supply of cheese (RS). Using the line drawing tool, add the world relative demand for cheese such that each country specializes in the Relative quantity production of the good for which it has a comparative advantage. Properly label this line. L' /BLW of cheese Carefully follow the instructions above and only draw the required object
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