12. In this question, we will work through factor returns under the Specific Factor model and the Heckscher-Ohlin model. To begin with, consider first the following scenario where we have two sectors in an economy. The Manufacturing uses labour and capital while the agricultural sector uses land and labour. The factor payments before trade are given below. Manufacturing Sales Revenue 150 Payments to Labour 100 Payments to Capital Agriculture Sales Revenue 150 Payments to Labour 8 Payments to Capital 100 Now consider a scenario when the country opens up for trade. Post trade, it observes an increase in the price of agriculture is 10% and the increase in the wage is 5%, without any change in the price of manufacturing goods. a) Determine the impact of the increase in the price of agriculture on the rental on land and the rental on capital b) Explain what has happened to the real rental on land and the real rental on capital. c) Now suppose that agricultural technology witnesses a drastic improvement in technology such that food production requires capital instead of land. Hence both the products now share in the common pool of capital. Consider the following data for the home country Manufacturing Sales Revenue 100 Payments to Labour 8 8 Payments to Capital Agriculture Sales Revenue 100 Payments to Labour Payments to Capital Which industry is capital-intensive? d) Now let us assume that (8PM/P)= 0% and (8PA/P)= 50%. Given the percentage changes in output prices in the data provided, calculate the percentage change in the rental on capital