Hecksher-Ohlin Model Help (Edited Thread)Watch
and capital. Suppose that the production function for each good is \homothetic". Put
capital K in the vertical axis and labour L in the horizontal axis. For Cloth production,
for any ray from the origin that has a slope of x, the slope of a tangent of an isoquant
at a point which crosses this particular ray is -4x. For Food production, for any ray
from the origin that has a slope of y, the slope of a tangent of an isoquant at a point
which crosses this particular ray is -5y.
(a) Draw the isoquants for the production of Cloth and of Food.
(b) Draw the two curves relating the capital to labour ratio (K/Lin the horizontal axis) with the wage to rental ratio (w/r in the vertical axis) for the production of
Cloth and for the production of Food. What can you say about the relative factor
intensities of the two sectors?
(c) Find the capital to labour ratios for both Food and Cloth when
w/r = 3 and w/r = 4.
Using the data from the previous exercise, suppose that there are two countries, A and
B, that have the same technology described above for Cloth and Food. Before trading
with each other, Country A employs 30 units of K and 15 units of L in the Cloth
industry. In the Food industry it employs 40 units of K. Country B employs K = 45,
L = 15 in the Food industry and K = 30 in the Cloth industry.
(a) Determine the factor prices w/r in country A in the two sectors and the amount of
L employed in the Food industry.
(b) Determine the factor prices w/r in country B in the two sectors and the amount of
L employed in the Cloth industry.
(c) Determine the comparative advantage for each country and the trade pattern.
Which group in A will oppose opening up trade and why?
I am pretty sure I have managed to do the first two parts of the first question, but I have no idea how to find the relationship between w/r and K/L given the current information.
I am not really sure how to start the second one either so any point in the right direction would be appreciated.
Im doing this too, it's so hard haha
Also are we expected to do have figures in the diagram for part B about factor intensity?
And then I literally have no idea what to do for anything else
I've completed it ! After 11 hours continuous work. But I just made LOTS of assumptions, and I can't really explain what I've done. Do I actually know any of you? I'm Ashley Rawlings, by the way. So if you know who I am then might be easier to have a look at what me and my lot have done, we think its right.