Let us assume a 2x2x2 model (country H & F, good A & B, factors L...

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Economics

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 countryâ€™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.

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3.9 Ratings (633 Votes)

A Here the relative demand is explaned as follows which is L L and K K and it is a part of 2x2x2 model The autarky price of a good is the market clearing price in a closed economy Autarky price pA ppA at autarky At this price X M 0 because domestic and foreign markets are not connectedContemporary Today national economic autarkies are relatively rare A commonlycited example is North Korea based on the government ideology of Juche selfreliance which is concerned with maintaining its domestic localized economy in the face of its See Answer

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