Question: Consider the H-O model studied in class (all the standard assumptions hold). There are 2 commodities (garments and trucks) and 2 mobile factors (labor and

Consider the H-O model studied in class (all the standard assumptions hold). There are 2 commodities (garments and trucks) and 2 mobile factors (labor and capital). The production of garments (qG) is labor intensive while the production of trucks (qT) is capital intensive. Assume the country of Japania is a "small" country relatively well endowed with capital. Use complete explanations/diagrams to answer the questions below.

Effects of the movement from Autarky to Free Trade for Japania. Assume now Japania starts trading freely with the rest of the world.

1. Show how commodity prices ( pT/pG ) and the production bundle change.

2. Show how the ratio of input prices w/r changes using the relevant diagram

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