the relative endowment in Home as compared to Foreign was K/L > K*/L* and that computer...

 

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the relative endowment in Home as compared to Foreign was K/L > K*/L* and that computer was capital-intensive and shoes was labor intensive. Suppose Home doubles in size, while Foreign remains the same size. (i) Show that an equal proportional increase in capital and labor in Home will not change the pattern of trade between Home and Foreign. (ii) Show that the volume of trade will change and so is the international price pc/Ps. Show in which direction this international price will change. (iii) Show how the wage-rental ratio will change in the Home country. the relative endowment in Home as compared to Foreign was K/L > K*/L* and that computer was capital-intensive and shoes was labor intensive. Suppose Home doubles in size, while Foreign remains the same size. (i) Show that an equal proportional increase in capital and labor in Home will not change the pattern of trade between Home and Foreign. (ii) Show that the volume of trade will change and so is the international price pc/Ps. Show in which direction this international price will change. (iii) Show how the wage-rental ratio will change in the Home country.