Question: ? Lesotho and Swaziland citizens enjoy Chakalaka and Beer. Suppose that these are the only two products they consume and produce with Chakalaka being relatively
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Lesotho and Swaziland citizens enjoy Chakalaka and Beer. Suppose that these are the only two products they consume and produce with Chakalaka being relatively more labour-intensive and Beer being relatively more capital-intensive in the production process. Suppose that, as a result of the Southern African Customs Union, all impediments or barriers to trade are lifted, such that these countries can freely trade both goods without any costs. Furthermore, assume thataa =0.8andaa =0.2. 4.1 Assuming that an Entrepreneur knows the price of both these goods and both goods are produced, using the Learner diagram describe how the entrepreneur chooses the cost- minimising combinations of inputs in the production of both goods based on the neoclassical trade theory. [12] 4.2 Suppose the price of beer increases, indicate on the diagram drawn in 4.1 and explain what happens to the production of Chakalaka and Beer based on the Stolper-Samuelson proposition, given that both goods are produced.
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