Business, 20.04.2020 22:58 Geo777

Suppose that the United States and Canada produce clothing (C) and food (F). The U. S. has an endowment of 200 man-hours, each of which can produce either 2 units of clothing or 2 units of food. Canada has an endowment of 300 man-hours, each of which can produce either 1 unit of clothing or 2 units of food. Consumers in both countries have identical homothetic preferences represented by the utility function: U (Dc, DF) = DDF (e) Let Pc/P, denote the relative price of clothing and derive the relative supply and relative demand curves for each economy.

i. For each country, use the production possibility frontiers above to derive the quantity of production of each good.
ii. Put Pc/P, on the y axis and Qc/QF on the 3 axis of a graph, and draw the relative demand and supply curves for both economies in autarky. Use a different graph for each economy.
iii. Indicate the coordinates of the point where both curves intersect.
iv. Do these curves depend on the economies' endowments in terms of number of man-hours?

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Suppose that the United States and Canada produce clothing (C) and food (F). The U. S. has an endowm...

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