Question
Use the RELATIVE DEMAND -RELATIVE SUPPLY framework in the following.Assume that Land is specific to AG and Capital is Specific to MANU. BIG and SMALL(ish)
Use the RELATIVE DEMAND -RELATIVE SUPPLY framework in the following.Assume that Land is specific to AG and Capital is Specific to MANU.
BIG and SMALL(ish):Assume Home and Foreign have identical preferences but Home has relatively more Capital (K) than Foreign but proportionally less land (T).Suppose Home is 5 times larger than Foreign.
a)Explain how the relative sizes of the two countries determines the equilibrium World Relative Prices (Pm/Pa) and the pattern of trade.
b)Show that both countries willGain from Tradebut explain why Foreign gains more.
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Changing Resource Problems Of The World
Authors: Ronald G Ridker
1st Edition
131735494X, 9781317354949
