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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