Consider a Heckscher-Ohlin model with two sectors, High Tech (H) and traditional manufacturing (M). The two inputs are skilled labour (S) and unskilled labour (U). Sector H is intensive in the use of skilled labour and sector M is intensive in the use of unskilled labour. Suppose the Home economy is small and open so that goods prices are determined in world markets and changes at Home have no effect on these prices. Let ws be the wage for skilled workers and wu be the wage for unskilled workers. (a) Suppose that there is an increase in the number of unskilled workers. Use diagrams and explain how this affects outputs and the real returns to skilled and unskilled workers. (b) Suppose there is a fall in the price of the high tech good, pH. Use diagrams to show how this affects outputs and the real returns to skilled and unskilled workers.

Consider a Heckscher-Ohlin model with two sectors, High Tech (H) and traditional manufacturing (M). The two inputs are skilled labour (S) and unskilled labour (U). Sector H is intensive in the use of skilled labour and sector M is intensive in the use of unskilled labour. Suppose the Home economy is small and open so that goods prices are determined in world markets and changes at Home have no effect on these prices. Let ws be the wage for skilled workers and wu be the wage for unskilled workers. (a) Suppose that there is an increase in the number of unskilled workers. Use diagrams and explain how this affects outputs and the real returns to skilled and unskilled workers. (b) Suppose there is a fall in the price of the high tech good, pH. Use diagrams to show how this affects outputs and the real returns to skilled and unskilled workers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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