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The following table denes terms relevant to the basic Ricardian model of one factor and two goods. number oflabor hours needed to produce a unit

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The following table denes terms relevant to the basic Ricardian model of one factor and two goods. number oflabor hours needed to produce a unit of cheese In Home; number oflabor hours needed to produce a unit of whiskey in Home' number oflabor hours needed to produce a unit of cheese in Foreign; number oflabor hours needed to produce a unit of whiskey in Foreign; the price per pound of cheese on world markets; the price per gallon of whiskey on world markets. The gure to the right shows the wond relative supply of cheese (RS) Using the line drawing foot, add the world relative demand for cheese such that each country specializes In the production of the good for which it has a comparative advantage. Properly label this line. Carefully follow the instructions above and only draw the requueo' object, According to your diagram, Home specializes in cheese , while Foreign specializes in whiskey Relative Price of cheese (F'ch'w) LlaLD . Relative quantity L v'atw ofcheese 9.9 l3

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