Assume a Ricardian, constant-cost world. There are two countries, the United States and Canada. Each country can produce cameras and milk. The table below shows production per man-hour for each country. US Canada cameras 6 2 milk 1 2 The United States has a labor force of 1,000 workers, and Canada has a labor force of 500 workers. a) Graph the world supply curve for cameras. b) Show a possible world demand curve and price
Assume a Ricardian, constant-cost world. There are two countries, the United States and
Canada. Each country can produce cameras and milk. The table below shows production per
man-hour for each country.
| US | Canada | |
| cameras | 6 | 2 |
| milk | 1 | 2 |
The United States has a labor force of 1,000 workers, and Canada has a labor force of 500
workers.
a) Graph the world supply curve for cameras.
b) Show a possible world demand curve and price
The Ricardian model implies that two nations produce two things using just one element of the production, which is generally labor. All markets are completely competitive in the model, which is a general equilibrium model. The items produced are believed to be uniform across nations and throughout industries.
Within a country, labor is homogenous, but various countries may have varying productivities. This suggests that production technique is expected to vary by country. Labor is costless to move between industries inside a country, but not across countries. Labor is likely to be fully employed as well. Consumers (laborers) are considered to maximize utility while being constrained by their money.
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