Consumers Demand More of Commodity X (The L-Intensive Commodity)and Less

question 11

Essay

Consumers demand more of commodity X (the L-intensive commodity)and less of commodity Y (the K-intensive commodity).Suppose that Nation 1 is India,commodity X is textiles,and commodity Y is food.Starting from the no-trade equilibrium position and using the Heckscher-Ohlin model,trace the effect of this change in tastes on India's
a)relative commodity prices and demand for food and textiles,
b)production of both commodities and factor prices,
c)comparative advantage and volume of trade.
d)Do you expect international trade to lead to the complete equalization of relative commodity and factor prices between India and the United States? Why?

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Definitions:

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the market.

Northern Minnesota

A geographical region in the U.S. state of Minnesota, known for its natural beauty and outdoor activities.

Southern Canada

The region of Canada located closest to the United States border, characterized by its populous cities, milder climate, and economic hubs.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision.