Consider the Specific Factors modelwith two countries, Home and Foreign, with two goods, cars (c) and pharmaceuticaldrugs (d), and three factors, capital K, skilled labour S, and unskilled labour L. Theproduction functions are given by1F.(Ke, L.) = K. Lễ and Fa(Ka, Sa) = K}S}.That is, skilled labour is specific to pharmaceutical drugs, and unskilled labour tocars. Suppose that the countries' factor endowments are KHand LF = 3/2, and SH2 = KF, LH1/2, so that the total labour force is 2 in: 11 and SF||both countries. The price of capital is denoted by r, the price of skilled and unskilledlabour by w, and wi. Denote the goods' prices by pc and pd, and normalise pd =for simplicity.The demand for cars and drugs in country j = H, F is given by x and x:2Yiand ra3 pe1yi||3 pawhere Y' denotes aggregate income in country j.(d) With free trade in both goods c and d, which good will Home export, and willskilled or unskilled workers be better off? Explain or compute.

The production function is given as The skilled labor produces pharmaceutical drugs, while unskilled…

Consider the Specific Factors model with two countries, Home and Foreign, with two goods, cars (c) and pharmaceutical drugs (d), and three factors, capital K, skilled labour S, and unskilled labour L. The production functions are given by Fe(Kc, Lc) = K² Lễ and Fa(Ka, Sa) = KS. = That is, skilled labour is specific to pharmaceutical drugs, and unskilled labour to cars. Suppose that the countries' factor endowments are KH = 2 = KF, LH = 1 and LF = 3/2, and SH = 1 and SF : 1/2, so that the total labour force is 2 in both countries. The price of capital is denoted by r, the price of skilled and unskilled labour by w, and w₁. Denote the goods' prices by pc and pa, and normalise pa = 1 for simplicity. The demand for cars and drugs in country j = H, F is given by 2 and : 2Yj 3 på where y denotes aggregate income in country j. = and - 1Yj 3 ра (d) With free trade in both goods c and d, which good will Home export, and will skilled or unskilled workers be better off? Explain or compute.

Consider the Specific Factors model with two countries, Home and Foreign, with two goods, cars (c) and pharmaceutical drugs (d), and three factors, capital K, skilled labour S, and unskilled labour L. The production functions are given by Fe(Kc, Lc) = K² Lễ and Fa(Ka, Sa) = KS. = That is, skilled labour is specific to pharmaceutical drugs, and unskilled labour to cars. Suppose that the countries' factor endowments are KH = 2 = KF, LH = 1 and LF = 3/2, and SH = 1 and SF : 1/2, so that the total labour force is 2 in both countries. The price of capital is denoted by r, the price of skilled and unskilled labour by w, and w₁. Denote the goods' prices by pc and pa, and normalise pa = 1 for simplicity. The demand for cars and drugs in country j = H, F is given by 2 and : 2Yj 3 på where y denotes aggregate income in country j. = and - 1Yj 3 ра (d) With free trade in both goods c and d, which good will Home export, and will skilled or unskilled workers be better off? Explain or compute.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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