Suppose two countries, China and India, produce two goods: rice (R) and skinny jeans (S). Assume that land is specific to rice, while capital is specific to production of skinny jeans, and labor is free to move between the two industries. Assume that when China and India engage in free trade, the relative price of rice increases in China and the relative price of skinny jeans increases in India. 1. Explain what these changes in prices means about the comparative advantage of the two countries. When China and India open up to trade, what good will each country export?

Suppose two countries, China and India, produce two goods: rice (R) and skinny jeans (S). Assume that land is specific to rice, while capital is specific to production of skinny jeans, and labor is free to move between the two industries. Assume that when China and India engage in free trade, the relative price of rice increases in China and the relative price of skinny jeans increases in India. 1. Explain what these changes in prices means about the comparative advantage of the two countries. When China and India open up to trade, what good will each country export?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 8PA

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Pls explain each answer by calculations