Let us assume a 2x2x2 model (country H & F, good A & B,factors L & K).
The two countries are identical except L < L* and K >K*
More over good A is labor intensive and good B is capitalintensive
(a) Now suppose the relative demand for good A (Rd) is NOTidentical in H and F. Rather at each relative world price of goodA, the H country’s relative demand for good A (Rd) is way smallerthan that of country F. In this case show the autarky prices usinga graph with world relative supply and relative demands and showthe direction of trade.
