b. Assume that the U.S. produces two goods, chemicals and grain, using two factors, labor and land. Labor can move freely between sectors but land cannot. Over the past year, the war in Ukraine has significantly raised the world price of grain. How does this change in the grain price affect the nominal factor prices of land and labor in the U.S.? What happens to the real return of land in both sectors? Explain your reasoning using one or several diagrams.

b. Assume that the U.S. produces two goods, chemicals and grain, using two factors, labor and land. Labor can move freely between sectors but land cannot. Over the past year, the war in Ukraine has significantly raised the world price of grain. How does this change in the grain price affect the nominal factor prices of land and labor in the U.S.? What happens to the real return of land in both sectors? Explain your reasoning using one or several diagrams.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q.13. Subject :- Economy