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“Factor prices determine factor proportions used in production of goods in the H-O model.”
Explain with the help of a graph.
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- Examine the Stolper-Samuelson Theorem in conjunction with the H-O model and the factors of production.The von Thünen model tells us that the pattern of farm land use: varies with distance from market. is essentially uniform in highly competitive economies. is conditioned by culture and is different in the Southern and Northern hemispheres. follows the law of competitive development.The (2 factor,2good,2countries) Heckscher-Ohlin model is based on neoclassical production functions ."Describe the main assumption and characteristics of these production functions.
- Consider the following modified version of the model of the firm studied in class. The firm lives for two periods, producing output Y in the first period, and output Y 0 in the second period by operating the following technologies: Y = zF(K, Nd ), and Y '= z' H(K0'), where K (K') denote physical capital in the first (second) period, Nd is labour demanded in the first period, and z (z ') denotes total factor productivity (henceforth TFP) in the first (second) period. The function F is increasing in both arguments, it is concave, and it satisfies constant returns to scale. The function H is increasing and concave. The firm hires labour in a competitive market at the wage w. Capital in the first period K is fixed, and physical capital depreciates at a rate of 100%, so that K'= I, where I denotes investment. Assume that the level of future total factor productivity is uncertain. Specifically, z' = zH with probability φH ∈ (0, 1), and z'= zL with probability φL = 1 − φH, where zL < zH.…draw the labour demand equation and the labour supply equation for a RBC modelConsider again the canonical OLG model with log preferences and a Cobb-Douglas production function, but assume that individuals now work in both periods of their lives. (a) Define a competitive equilibrium and the steady-state equilibrium. (b) Characterize the steady-state equilibrium and the transitional dynamics in this economy. (c) Can this economy generate overaccumulation?
- Figure 2 represents the Texas labor market. In this simplified model, labor and capital are the only factors of production. The initial supply of labor is denoted by S0 and consists entirely of U.S. workers. The demand for labor is denoted by D. Quantity of workers are in thousands and the wage rate is for a 40-hour workweek. (a) At labor market equilibrium, what is total weekly labor income? (b) At labor market equilibrium, what is the weekly income earned by U.S. capital owners? (Note: the capital owners are on the demand side – the demand curve reflects their demand for labor -- so the consumer surplus is the capital owner’s income.) Mexican labor migration yields a new labor supply curve, S1, which is the combination of domestic labor supply and Mexican labor. Given this: (c) What is total weekly labor income?(d) What is the weekly income earned by U.S. capital owners?Consider the following one-period model. Assume that the consumption good is produced by a linear technology: Y = zND where Y is the output of the con- sumption good, z is the exogenous total factor productivity, ND is the labour hours. Government has to finance its expenditures, G, using a lump-sum tax, T, on the rep- resentative consumer. There is no other tax in the economy. The firm is owned by the representative consumer who is endowed with h hours of time she can allocate between work, NS and leisure, l. Preferences of the representative consumer are: U (c, l) = α ln c + (1 − α) ln l (1) where 0 < α < 1 is a parameter. (a) Write down the definition of a competitive equilibrium for the above economy 1 (b) Solve for the leisure, l, the consumption, c, employment, N, wage rate, w, lump-sum tax, T , and output, Y in equilibrium. (c) Solve for the optimal allocation of leisure, l, the consumption, c, employment, N, output, Y . Contrast these quantities with those…Consider the following one-period model. Assume that the consumption good is produced by a linear technology: Y = zND where Y is the output of the con- sumption good, z is the exogenous total factor productivity, ND is the labour hours. Government has to finance its expenditures, G, using a lump-sum tax, T, on the rep- resentative consumer. There is no other tax in the economy. The firm is owned by the representative consumer who is endowed with h hours of time she can allocate between work, NS and leisure, l. Preferences of the representative consumer are: U (c, l) = α ln c + (1 − α) ln l (1) where 0 < α < 1 is a parameter. Answers for part b below: A consumer's choice of optimizing its consumption and labor hours (h - l ) is given by the point where , MRS(c , l) = wage rate Now , MRS (c, l) = MU(c) /MU(l) MU(c) = dU/d c = a/c MU(l) = dU /dl = (1-a )/l MRS = a (l)1−a (c)a (l)1-a (c) Putting this in optimal condition we have : a (l)(1−a) (c)a (l)(1-a) (c) = w --- (i) l = w…
- Do you agree that capital is topmost factor under the category of resources? Why? Please explain and justify your answers. When it comes to knowledge on customers' needs and expectations, does the three variables such as observations, interviews, and market research are really factors in product development? Why? Kindly elaborate your answers per variable.In the specific factor model in a market equilibrium the mobile factor's productivity must be the same for the production of all goods. True FalseAssume that Trinbago is a small country that produces wine and motor vehicles, where motor vehicles are capital intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin (H-O) assumptions hold. The other country in the model is Vincyland. please conclude your findings