Two countries, the U.S. and Indonesia, use one factor, labor, to produce two goods, E and T (electronics and textiles). The unit labor requirements in the two countries are summarized in the following table. E T Indonesia 8 4 Both countries have a labor force of 360 units. Preferences are the same in the two countries and are described by the relative demand function: DT DE U.S. 3 3 16 PE 9 PT a. (4 marks) Which country has an absolute advantage in producing good 7? Which country has a comparative advantage in producing good T? b. (2 marks) Derive the relative price in autarky (no trade) for each country. PE c. (10 marks) Imagine now that the two countries are allowed to trade. Draw the world relative supply curve. For which range of prices will both countries specialize? What happens if the price is not in this range? d. (8 marks) Now draw the world relative demand curve and find the world equilibrium price. Do both countries specialize? What is the pattern of trade? e. (8 marks) Suppose the labor force in Indonesia grows to 480 units. What happens to the relative supply curve? What happens to the relative price p? f. (4 marks) Argue that the U.S. consumers are better off after the demographic change in the foreign country. Explain. g. (4 marks) "It has been all downhill for the workers in the U.S. since Indonesia entered the world market. They can't compete with hundreds of millions of people willing to work for a very low wage." Discuss.