Answer Happy

There are three countries in the world, H, F and E, and there
are no trade costs among them. They can produce two goods: Planes
and Clothes . The labor requirement for producing one unit of goods
and total labor endowment of each country are listed below
he world’s relative demand function takes the following form,
where 𝐷 denotes quantity of demand and 𝑝 denotes price: 𝐷𝑡/𝐷𝑐 =
𝑝𝑐/𝑝𝑡
(a) Draw the world’s relative supply and demand curve. the
variable on horizontal axis is world relative demand/supply of
clothes, and the variable on vertical axis is world relative price
of clothes.
b) How do countries specialize in goods production?
(c) Suppose F experiences a productivity boost, and consequently
𝑎𝑡 𝐹 is reduced to 2. Everything else stays unchanged. Draw the
world’s relative supply and demand curve in a new graph, and
describe each country’s specialization patterns.
(d) Compare your answers on country specializations in (b) and
(c), and rationalize your findings.
Cars Textiles Country H Labor 100 H = = 2 F a = a = 1 = 10 a = 4 af = 2 = 5 af = 6 a = 400 E 240