Suppose that in country A the income elasticity of demand for good S is less than 1,
Question:
Suppose that in country A the income elasticity of demand for good S is less than 1, and the income elasticity of demand for T is greater than 1. Suppose also that A exports good S and imports good T, and the S is relatively capital intensive in its production and that A is relatively capital abundant. What would happen to A’s trade pattern if, alternatively,
a. A were to experience an equi-proportionate drop in K and L?
b. A were to experience a relative increase in K versus L?
c. A were to experience a relative increase in L versus K?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: