Assignment 3 Part I. Heckscher – Ohlin Model Consider two countries , Vietnam and China , producing two goods , textile and televisions. Suppose that textile is relatively labor- intensive. Vietnam has 20 units of capital and 16 units of labor and China has300 units of capital and 150 units of labor
1 . Which country is relatively capital – abundant ? Explain
2. Which country will export textile ? Explain.
3 . In Vietnam the production of which good decreases under trade ? In China ?”
4 . In China , is the relative price of televisions higher under free trade or no trade ? Explain
5 . Which group benefits from trade in China ? In Vietnam ?
Part II . Heckscher – Ohlin Model and Stolper – Samuelson theorem
1 .Suppose that there are drastic technological improvements in shoe production at Home such that shoe factories can operate almost completely with computer- aided machines. Consider the following data for the Home country .”Computer’s .”Sales revenue = PC X Qc = 100 Payments to labor = W X Le = 50ssignmed Payments to capital = Kc X R = 50 Percentage increase in the price _ _ _ _ _ 0%PCshoes.”Sales revenue == Pr X Or = 100