In the Heckscher - Ohlin model of international trade, assume that at current factor prices cloth is produced using 20 hours of labour for each unit of capital (machine) and that food is produced using only 5 hours of labour per unit of capital. Suppose that the economy's total resources are 2400 hours of labour and 240 units of capital. Use a diagram like the one we used in the lecture to draw PPF without factor substitution.
In the Heckscher - Ohlin model of international trade, assume that at current factor prices cloth is produced using 20 hours of labour for each unit of capital (machine) and that food is produced using only 5 hours of labour per unit of capital. Suppose that the economy's total resources are 2400 hours of labour and 240 units of capital. Use a diagram like the one we used in the lecture to draw PPF without factor substitution.
Chapter20: International Trade
Section20.1: International Trade Theory
Problem 1ST
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In the Heckscher - Ohlin model of international trade, assume that at current factor prices cloth is produced using 20 hours of labour for each unit of capital (machine) and that food is produced using only 5 hours of labour per unit of capital. Suppose that the economy's total resources are 2400 hours of labour and 240 units of capital. Use a diagram like the one we used in the lecture to draw
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