Презентация на тему The specific factor model

Labor (L), Capital (K) and Land (T)

Cloth is produced using capital and labor
Food can be produced using land and labor.

Labor is a mobile factor can be used in either sector.

Land and Capital are both specific factors that can be used only in the production of one good

L

the marginal product of labor

Diminishing Returns

then, the economy must reduce output of food by

MPLf/MPLc
 
Slop of production possibilities curve= - MPLf/MPLc

* Pf= w

MPLf/MPLc = - Pc/Pf

At the production point, the production

possibility frontier must be tangent to a line whose slope is minus the price of cloth divided by that of food

each sector, receiving the same real wage rate, the

real incomes of capital owners and landowners also remain the same.

the sector whose relative price increases is definitely better

off.
The factor specific too the sector whose relative price decreases is definitely worse off.
The change in welfare for the mobile factor is ambiguous.

the factor that is specific to the export sector

of each country but hurts the factor specific to the import-competing sectors, with ambiguous effects on mobile factors.