Suppose the World includes two countries H and F, producing two goods 1 & 2, with...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose the World includes two countries H and F, producing two goods 1 & 2, with the following information: (1). labor endowment: LH = 6, LF = 4 (1). labor requirement for producing 1 unit of good: off = 1, a = 2; af = 1, af = 1 H F 1 1 (3). utility for both countries: u(c₁, C₂) = c² c² Notice that the above variables are given (predetermined). They are information that are available to us to solve for the equilibrium. These variables are called exogenous variables. For our above-mentioned example, they include: technology (the labor productivities), prefer- ence (the utility function), and endowment (in the Ricardian case, it includes only labor). Step 1. Production: Question: Who export What? Step 2. Wage determination: Step 3. Optimal Consumption: Step 4. market clearing condition: Summary of the Equilibrium: Exercise: assume LH = Example 2 12, does the equilibrium of complete specialization exist? (Hint: check H whether the condition = < <= 1 is satisfied?) P1 P2 α2 Example - 3 In example 2, you will find no equilibrium of complete specialization exist. Hence, we should assume country H produce both goods 1 and 2, F produces only goods 2. [Trick: in the case of incomplete specialization, first assume the larger country produces both products.] Try to illustrate this case using the relative demand and relative supply curves. What if population of Home country continues to expand? Example-4 Now go back to example 1, suppose now country H has a technology improvement in both goods 1 & 2, which makes af = 1/2 and a = 1, how will the trade pattern be changed? Who H 2 will export what to whom? by how much? Solve for the new equilibrium. Can you draw any conclusion on consumer's welfare compared with Example 1? Example - 5 Now go back to example 1, suppose now country H has a technology improvement in goods H 2, which makes a 1/2, how will the trade pattern be changed? Who will export what to whom? by how much? Solve for the new equilibrium. Can you draw any conclusion on consumer's welfare compared with Example 1? = Suppose the World includes two countries H and F, producing two goods 1 & 2, with the following information: (1). labor endowment: LH = 6, LF = 4 (1). labor requirement for producing 1 unit of good: off = 1, a = 2; af = 1, af = 1 H F 1 1 (3). utility for both countries: u(c₁, C₂) = c² c² Notice that the above variables are given (predetermined). They are information that are available to us to solve for the equilibrium. These variables are called exogenous variables. For our above-mentioned example, they include: technology (the labor productivities), prefer- ence (the utility function), and endowment (in the Ricardian case, it includes only labor). Step 1. Production: Question: Who export What? Step 2. Wage determination: Step 3. Optimal Consumption: Step 4. market clearing condition: Summary of the Equilibrium: Exercise: assume LH = Example 2 12, does the equilibrium of complete specialization exist? (Hint: check H whether the condition = < <= 1 is satisfied?) P1 P2 α2 Example - 3 In example 2, you will find no equilibrium of complete specialization exist. Hence, we should assume country H produce both goods 1 and 2, F produces only goods 2. [Trick: in the case of incomplete specialization, first assume the larger country produces both products.] Try to illustrate this case using the relative demand and relative supply curves. What if population of Home country continues to expand? Example-4 Now go back to example 1, suppose now country H has a technology improvement in both goods 1 & 2, which makes af = 1/2 and a = 1, how will the trade pattern be changed? Who H 2 will export what to whom? by how much? Solve for the new equilibrium. Can you draw any conclusion on consumer's welfare compared with Example 1? Example - 5 Now go back to example 1, suppose now country H has a technology improvement in goods H 2, which makes a 1/2, how will the trade pattern be changed? Who will export what to whom? by how much? Solve for the new equilibrium. Can you draw any conclusion on consumer's welfare compared with Example 1? =
Expert Answer:
Answer rating: 100% (QA)
To determine the trade patterns and equilibrium in each example we need to follow the steps outlined in the question Lets go through each example one by one Example 1 Step 1 Production Country H has a ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these economics questions
-
123 Compare the purely graphical properties of these two notations, and the ways in which the graphical properties of each display correspond to the information structure being defined. Describe...
-
can someone solve this Modern workstations typically have memory systems that incorporate two or three levels of caching. Explain why they are designed like this. [4 marks] In order to investigate...
-
Two franchising experts recently debated the issue of whether new college graduates should consider franchising as a pathway to entrepreneurship. Jeff Elgin said recent college graduates are not...
-
Ms. N has $60,000 suspended passive activity losses from her interest in the EZ Limited Partnership. In December, she sold this interest to N Inc., a regular corporation in which she is the sole...
-
The tongs consist of two jaws pinned to links at A, B, C, and D. Determine the horizontal and vertical components of force exerted on the stone of weight W at F and G in order to lift it. Given: a =...
-
Compare the magnitudes and directions of the magnetic fields measure in Problem 24. Data from Problem 24 A positively charged particle is at rest on the positive \(z\) axis in reference frame \(S\)....
-
1. The SEC is often called the watchdog of corporate America. How does it assist in preventing fraud? 2. According to the summary, why did the Waste Management executives commit the fraud? On March...
-
123456 7 8 Define plant location. Define product layout and process layout. What are the methods of production? Define work study. What do you mean by method study and time study? Explain inventory...
-
The following data relates to Prism traders limited for the year ended 31st December, 2018. Shs Cash and marketable securities Fixed Assets Sales Net Income Quick Ratio Current Ratio Average...
-
A Japanese bank introduced the concept of around-the-clock access to cash in the 1960s when it installed the world's first cash-dispensing machine. In 1968, the first networked ATM appeared in...
-
How does the position of an option holder differ from that of an option writer?
-
What are the three categories/buckets of financial instruments and the key factors in determining expected credit losses?
-
How is a hedge of a net investment in a foreign entity accounted for?
-
Both a firm commitment and a forecasted transaction result in a future transaction. Why is a hedge of a firm commitment a fair value hedge and a hedge of a forecasted transaction a cash flow hedge?
-
Explain the differences in classifications between IAS 39 and IFRS 9.
-
Provide two synthetic routs for the following transformation.
-
Prepare a stock card using the following information A company is registered for GST which it pays quarterly, assume GST was last paid on the 30th of June 2019. It uses weighted average cost...
-
Mallory Corporation has a calendar year-end. The corporation has paid estimated payments of $10,000 during 2012 but still owes an additional $5,000 for its 2012 tax year. a. When is the 2012 tax...
-
While preparing Massie Miller's 2012 Schedule A, you review the following list of possible charitable deductions provided by Massie: Cash contribution to a family whose house burned...
-
Linda and Richard are married and file a joint return for 2012. During the year, Linda, who works as an accountant for a national airline, used $2,100 worth of free passes for travel on the airline;...
-
Describe how management practices and organizational behaviour can help organizations deal with the contemporary management concerns discussed in the chapter. In other words, what are some of the...
-
To demonstrate that you grasp the idea of contingencies in organizational behaviour, consider how closely managers should supervise the work of their employees. What are some factors on which...
-
Describe the assumptions about organizational behaviour that are reflected in television shows, such as situation comedies and police dramas. How accurate are these portrayals? Do they influence our...
Study smarter with the SolutionInn App