a) Do you agree with the following statement:According to the HO model, all people in any country engaging in free trade gain from trade.

b)It is known that the price of coffee beans in the international market fluctuates a great deal from year to year. The following figure shows the import demand and the export supply over time in the international coffee market. Each data point is a combination of the real coffee price per pound and the quantity of coffee traded (i.e. exported and imported).

Based on the specific-factors model, discuss how the change in real coffee price over the 2001-2011 period affects earnings of land owners and workers

Real price of coffee 4.00 Import demand (2012 $ 1986-2001 Import demand 2011 per lb) 3.50 1986 3.00 Export supply 2001-2011 2.50 2.00 1995 9 2011 Export supply 1986 1.50 1.00 19930 0.50 2001 20 40 60 80 100 120 140 Quantity of coffee ( millions of 60-kilo bags)