Sie sind auf Seite 1von 2

1)a)False

Rishi Chhagan

46108130

As Price of Manufacturing (Pm) goes up, Labor of Manufacturing(Lm) increases so that the Marginal Product of Capital (MPKm). This means the rental for capital goes up. Capital Owners can afford to buy more of both goods so they are better off. The relative rise in price of manufacturing on agriculture means that capital owners gain more than land owners.

b)True None of the factors of productions will change as the relative price (the slope on line tangent Home’s PPF). There will be no change in Utility

2)

Consider the Specific Factors model of trade. Take a country, Sweden, that produces two goods, Furniture (F) and Meatballs (M). Production in each sector requires capital (K), which is perfectly mobile across sectors, and labor which has skills specific to each sector: carpenters (LF) can only produce Furniture and cooks (LM) can only produce Meatballs

  • a) i)

1)a)False Rishi Chhagan 46108130 As Price of Manufacturing (Pm) goes up, Labor of Manufacturing(Lm) increases so

ii) The relative price of Meatballs will have an increase in the marginal product of capital of cooks. There is an ambiguous effect on the real wage.

  • b) i)

Rishi Chhagan

46108130

Rishi Chhagan 46108130 ii) Sweden has a comparative advantage in Furniture as the price remained unchanged

ii)

Sweden has a

comparative advantage in Furniture as the price remained unchanged when they opened to trade and the price of meatballs fell. The relative price of Furniture is higher although and this shows the comparative advantage iii) It is exporting furniture and importing meatballs

iv)More capital since it is mobile will be put into producing furniture, the number of carpenters will be the same, and MPL will increase. The number of cooks remain the same but the capital stock will reduce.

v)The real return of capital of meatballs decreases and the real return of capital of furniture increases. The real wage of both carpenters and cooks will increase but carpenters will gain more than cooks.

vi) They as a whole gain from trade, yes

vii) Cooks and labor associations will not be happy with trade

c) i) Production of Furniture increases at a point where MPL may not be efficient (i.e. diminishing returns). Production of Meatballs will also increase. ii) Benefit the capital owners and it will not benefit the carpenters and the native cooks.

3a) From the data shown, Netherlands (NLD) is both more labor and capital abundant.

b) In 2007 for the textiles industry, Portugal is more labor intensive than Netherlands (EMP). Netherlands is more Capital intensive as a whole , but less capital intensive in the specific textile industry. Portugal can be seen as more labor intensive. Ranking of sectors is different in both countries