Business, 12.02.2020 04:15 lacyfigueroa

Suppose Home has 300 units of labor. It can produce two goods, apples and bananas. In Home a worker can produce 3 apples or 5 bananas. Now suppose there is another country, Foreign, with a labor force of 200. In Foreign aworker can produce 2 apples or 10 bananas.

a.) Construct the world relative supply curve, expressing the relative price of apples (PA/PB) in terms of the relative quantity of apples (QA/QB).

Now suppose that world relative demand takes the following form: RD: \frac{Q_A}{Q_B}=\frac{P_B}{P_A} (Hint: this is just the inverse function.)

b.) Graph the relative demand curve together with the relative supply curve. What is the equilibrium relative price of apples? Describe the pattern of trade (who exports what).

Assume Home workers are less productive in both industries. What happens (conceptually) to the gains from trade for each country compared to before?

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Suppose Home has 300 units of labor. It can produce two goods, apples and bananas. In Home a worker...