(30 marks) In a Ricardian model, there are two countries: Canada (CAN) and India (IND). Two...

In a Ricardian model, there are two countries: Canada (CAN) and India (IND). Two goods are produced, each using only labour: games (g) and shoes (s). The unit labour requirements to produce these goods in each country are:

a_LG^CAN=4	a_{LG ^IND= 4}
a_Ls^CAN =6	a_LG^{IND = 3}

Each country has the following amounts of labour: .

What are the comparative advantages of each country, if they have any? Explain why and show your work.
Now assume that Canada and India open up to trade. Draw the relative supply curve of games and a relative demand curve that intersects it where the relative price of games is equal to 1. You should also label the relative price at each of the “steps” of the RS curve as well as the relative quantity at the vertical portion of the RS curve for full marks.
Using the RS curve from the last part, what is the pattern of trade/specialization in both countries? Explain why.
Illustrate the gains from trade for Canada when it opens up to trade with India, using a diagram containing the PPF.
Calculate the relative wage of Canada, relative to India with trade. You may assume the price of games is 1.
Suppose that the unit labour requirement for games in Canada,, decreased to 3. Explain how this would affect the gains from trade for Canada, assuming that the RD curve still intersects the new RS curve at a relative price of games of 1. Draw at least a diagram containing the PPF to show the new gains from trade.

Expert Solution

Rahul Sunny answered 1 year ago

Ricardian Model with Technological Progress: Consider the Ricardian model of trade. Two countries, Paraguay and Uruguay,...

Ricardian Model with Technological Progress: Consider the Ricardian model of trade. Two countries, Paraguay and Uruguay, produce two goods, Beef (B) and Soybeans (S), using only labor. Paraguay can produce one tonne of Beef with 3 units of labor and one tonne of Soybeans with 3 units of labor. Uruguay can produce one tonne of Beef with 2 units of labor and one tonne of Soybeans with 3 units of labor. Both countries are endowed with a labor force of...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 6 hours and for a cheese is 12 hours. In New Zealand the unit labour requirement for a beer is 4 hours and for a cheese is 1 hour. Australia has an endowment of 3600 hours of labour. New Zealand has an endowment of 400 hours of labour. Draw a...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 10 hours and for a cheese is 10 hours. In New Zealand the unit labour requirement for a beer is 4 hour and for a cheese is 1 hour. Australia has an endowment of 2000 hours of labour. New Zealand has an endowment of 400 hours of labour. 1 Draw...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 6 hours and for a cheese is 12 hours. In New Zealand the unit labour requirement for a beer is 4 hours and for a cheese is 1 hour. Australia has an endowment of 3600 hours of labour. New Zealand has an endowment of 400 hours of labour. Draw a...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods called beer and cheese. In Australia the unit labour requirement for a beer is 6 hours and for a cheese is 12 hours. In New Zealand the unit labour requirement for a beer is 4 hours and for a cheese is 1 hour. Australia has an endowment of 3600 hours of labour. New Zealand has an endowment of 400 hours of labour. Draw a...

Consider the Ricardian model taught in the class with only two countries in the world, China...

Consider the Ricardian model taught in the class with only two countries in the world, China and Singapore, producing two goods Rice and Cloth. China has comparative advantage in Cloth and Singapore in Rice！Ricardian model says they should specialize according to their comparative advantage. Why China may not follow such a rule, while for Singapore it is not a concern?

Assume a Ricardian model with two countries, Home and Foreign, that both produce coffee and tea....

Assume a Ricardian model with two countries, Home and Foreign, that both produce coffee and tea. Home has 600 units of labor (L) available. Home’s unit labor requirement in the production of coffee is aLC = 4, while in the production of tea it is aLT = 3. Foreign has 800 units of labor (L*) available. Foreign’s unit labor requirement in the production of coffee is a*LC = 2, while in the production of tea it is a*LT = 1....

Q-Use the Ricardian model analyse economic effects of by Ricardian model between two production goods: tomatoes and paper.

Q-Use the Ricardian model analyse economic effects of by Ricardian model between two production goods: tomatoes and paper. In Sweden, it takes 10 hours to produce a kilo of paper, and 3 hours to produce a kilo of tomatoes. Under free trade before the Corona virus occurred, the world relative price of paper in terms of tomatoes was 10. a) Under free trade, what good or goods does Sweden produce? What does it export? Explain your answer. b) Under free...

Present the economy of one of the following countries: India Vietnam Canada France South Africa Brazil...

Present the economy of one of the following countries: India Vietnam Canada France South Africa Brazil US UAE Topics discussed in the project should including all of the following points and any additional information that sparks your interest: GDP & Growth Rate Main industries that contribute to the GDP Employment and Unemployment rate, Labour Force Participation Rate Inflation or Deflation rate - is it a healthy rate? Fiscal Policy Monetary Policy

Why the two countries India & Pakistan have fought?

Question

(30 marks) In a Ricardian model, there are two countries: Canada (CAN) and India (IND). Two...

Solutions

Expert Solution

Related Solutions

Ricardian Model with Technological Progress: Consider the Ricardian model of trade. Two countries, Paraguay and Uruguay,...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider a Ricardian model. There are two countries called Australia and New Zealand and two goods...

Consider the Ricardian model taught in the class with only two countries in the world, China...

Assume a Ricardian model with two countries, Home and Foreign, that both produce coffee and tea....

Q-Use the Ricardian model analyse economic effects of by Ricardian model between two production goods: tomatoes and paper.

Present the economy of one of the following countries: India Vietnam Canada France South Africa Brazil...

Why the two countries India & Pakistan have fought?