Consider the production of handmade rugs and assembly robots in India and Canada. Assume that Canada is relatively abundant in capital and that India is relative abundant in labour. Furthermore assume that the production technology for rugs and robots is the same in both countries. Draw production possibilities frontiers for each country keeping the production of rugs in the horizontal axis and the production of robots in the vertical axis. Assuming that consumer preferences are the same in both countries, add indifference curves and relative price lines under autarky. What are the differences in the relative price of rugs between the countries under autarky?
Consider the production of handmade rugs and assembly robots in India and Canada. Assume that Canada is relatively abundant in capital and that India is relative abundant in labour. Furthermore assume that the production technology for rugs and robots is the same in both countries. Draw production possibilities frontiers for each country keeping the production of rugs in the horizontal axis and the production of robots in the vertical axis. Assuming that consumer preferences are the same in both countries, add indifference curves and relative price lines under autarky. What are the differences in the relative price of rugs between the countries under autarky?
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.6P
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Consider the production of handmade rugs and assembly robots in India and Canada. Assume that Canada is relatively abundant in capital and that India is relative abundant in labour. Furthermore assume that the production technology for rugs and robots is the same in both countries.
Draw production possibilities frontiers for each country keeping the production of rugs in the horizontal axis and the production of robots in the vertical axis. Assuming that consumer preferences are the same in both countries, add indifference
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