Analysis of wage rate and rental rate in foreign.
Using a diagram similar to Figure 4-8, suppose the relative price of computers decreases in Foreign.
a.What happens to the capital employment shares of the computer industry and the shoe industry in Foreign?Why?
b.Use a diagram similar to Figure 4-8 to show how the relative labor demand curves shift in Foreign.
c.What happens to the wage relative to the rental rate in Foreign? Briefly describe the intuition.
d. Illustrate what happen to the labor-capital ratios of computers also shoes in Foreign? Briefly describe the intuition.