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country on functions for steel and clothing assume that the...

Question: country on functions for steel and clothing assume that the...

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country on functions for steel and clothing: Assume that the SS curve is described by the equation Pc/Ps- (w/r)1/ 1. Derive the inverse relative factor demand curves for clothing and steel. This is relative factor prices, w/r, as a function of relative factors, K/L 2. Assume that the prevailing relative price of clothing to steel is 1. Calculate the capital to labour ratio in each sector. 3. Assume that the aggregate endowments for one of the economies are as follows: L = Lc + Ls=90 KKc+Ks 120 Given full employment of each factor, what is the equilibrium allocation of capital and labour in each sector? How much of each good is produced? Hint: Use the results you calculated in question 2. Combining these with the endowments equations will give you four equations, which are all the equations you need to solve for the equilibrium values. 4. Suppose the world price of steel falls such that PePs) 1.5173, Solve for the new equilibrium factor allocations and for w/r 5. Return to the assumption where w/r 1, which was the case in question 2. Suppose a new technology was discovered causing an influx of new capital investments. The endowment of capital grows from 120 to 150. How will the output of each good change? Which theorem predicts this

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