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only need to solve question 7-11 about the international economic
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Running head: INTERNATIONAL ECONOMICS
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Running head: INTERNATIONAL ECONOMICS
INTERNATIONAL ECONOMICS
7. a.) Basing the argument on the capital investment made by a specific company, the shoe
industry at Home is a capital-intensive company. There is a large financial investment on the
machinery for production compared to the labor input required for production.
WLc / RKc in computers compared to WLs / RLs in shoes it implies that shoe company is a
capital-intensive company.
b.) For computers
R / R = [(Pc/Pc) PcQc * (W/W) WLc] /RKc
= [(0%) (100) (W/W)(50)] / 50
= (W/W)
For shoes
R / R = [(Ps/Ps) PsQs * (W/W) WLs] /RKs
= [(50%) (100) (W/W)(5)] / 50
= 50/95 (W/W) (5/95)
To find the percentage change in output price, computer equation is substituted into the shoes
equation
R / R = (W/W) 50 / 90 * 100%
= 55.6%
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Running head: INTERNATIONAL ...