Consider a Heckscher-Ohlin model with two sectors, High Tech (H) and traditional manufacturing (M). The two inputs are skilled labour (S) and unskilled labour (U). Sector H is intensive in the use of skilled labour and sector M is intensive in the use of unskilled labour. Suppose the Home economy is small and open so that goods prices are determined in world markets and changes at Home have no effect on these prices. Let ws be the wage for skilled workers and wu be the wage for unskilled workers. (a) Suppose that there is an increase in the number of unskilled workers. Use diagrams and explain how this affects outputs and the real returns to skilled and unskilled workers. (b) Suppose there is a fall in the price of the high tech good, pH. Use diagrams to show how this affects outputs and the real returns to skilled and unskilled workers.

Consider a Heckscher-Ohlin model with two sectors, High Tech (H) and traditional manufacturing (M). The two inputs are skilled labour (S) and unskilled labour (U). Sector H is intensive in the use of skilled labour and sector M is intensive in the use of unskilled labour. Suppose the Home economy is small and open so that goods prices are determined in world markets and changes at Home have no effect on these prices. Let ws be the wage for skilled workers and wu be the wage for unskilled workers. (a) Suppose that there is an increase in the number of unskilled workers. Use diagrams and explain how this affects outputs and the real returns to skilled and unskilled workers. (b) Suppose there is a fall in the price of the high tech good, pH. Use diagrams to show how this affects outputs and the real returns to skilled and unskilled workers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A country produces two goods: X ( X-axis) and Y ( Y-axis). When the price of x is doubled ( 2x) and the price of Y is tripled( 3x), the isovalue curve becomes steeper. true or false
I'm a newbie so please if you could go step by step. thanks in advance.
Thank you!
Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the events describe below. a) A relaxation of policies allowing more foreign direct investment into the country. b) Increasing the minimum wage level. c) A decrease in expenditure on research and development. d) An increase in the retirement age. e) Government policies supporting the provision of services, without affecting manufacturing.
Problem 2: Production economy Consider a production economy with two firms, X and Y, and two factors of production, labor and capital. Firm X produces the output good X with a technology that can be de- scribed by the following production function: fx(lx, kx) = lx + kx, where lx is the quantity of labor and kx is the quantity of capital. Firm Y produces the output good Y with a technology that can be de- scribed by the following production funetion: fr(ly, ky) = y + VAy, where ly is the quantity of labor and ky is the quantity of capital. The economy has a total endowment of labor L > 0 and a total endowment of capital K = L. The price of the good X is p > 0 and the price of good Y is q = 1. These output prices are determined on international markets and are not affected by the supply decisions of the firms. (a) Find the set of production efficient allocations in this economy. Illus- trate the set of efficient factor allocations in a Bowley box diagram. Describe and illustrate the…
I need with questions when you do please explain as well
a) A planner in a small, open economy has a utility function U = x1x2 and production takes place according to the production functions Y1 = 10L, – 0.5L? Y2 10L2 – L3 The world prices of the goods are p1 10 and P2 5. The total amount of labour available in the economy is 5 units. (i) Formulate the Lagrange equation. (ii) Write down the Karush-Khun-Tucker conditions. (iii) Determine a possible solution. b) Let aggregate national income be given by Y; = C; + It + G; Where C, I and G are consumption, investment and government expenditure. Assume that consumption is given by C = mY; %3D Investment is given by I; = i + «(Y¢-1– Y;-2) %3D And government expenditure declines over time according to G¢ = Go(1 – 8)*, 0 < 8 < 1 Where 8 is the exogenous rate of decline of government expenditure (i) Derive the linear second order difference equation. (ii) Solve the difference equation.
3
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 Specific Factors model with two countries, Home and Foreign, with two goods, cars (c) and pharmaceutical drugs (d), and three factors, capital K, skilled labour S, and unskilled labour L. The production functions are given by 1 F.(Ke, Le) = K. Lễ and Fa(Ka, Sa) = K}S}. That is, skilled labour is specific to pharmaceutical drugs, and unskilled labour to cars. Suppose that the countries' factor endowments are KH = 2 = KF, and LF = 3/2, and SH LH :1 || 1 and SF = 1/2, so that the total labour force is 2 in both countries. The price of capital is denoted by r, the price of skilled and unskilled and normalise pa = labour by w, and wi. Denote the goods' prices by pc and Ра, : 1 for simplicity. The demand for cars and drugs in country j = H, F is given by x and r: %3D 2Yi and ra 3 pe 1Yi %3D 3 pa where Y' denotes aggregate income in country j. (a) Draw or compute the PPFS of Home and Foreign.
2
Assume an economy producing only two goods (shoes and computers) with a fixed amount of productive resources and technology and employing all its productive resources to the maximum.Production in this economy is subjected to the law of diminishing marginal returns and resourcesare assumed to be fully optimized. In addition, the cost of sacrificing shoes for computers andvice versa is 1. On the basis of the foregoing assumptions, answer the following questions: Why are points outside the frontier unattainable?