Consider two sectors in an economy. One sector produces exports and the other is the import-competing sector. Both these sectors use capital and labor for production. Assume that the import competing sector is relatively labor intensive. Show graphically as well as mathematically the effect of an increase in the price of the import-competing good on equilibrium factor prices.

Consider two sectors in an economy. One sector produces exports and the other is the import-competing sector. Both these sectors use capital and labor for production. Assume that the import competing sector is relatively labor intensive. Show graphically as well as mathematically the effect of an increase in the price of the import-competing good on equilibrium factor prices.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.6P

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