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Homework answers / question archive / 1)explain in your own words: (Topic- "gains and losses from trade in the specific-factors model ) 1) specific-factors model 2) earnings of Labor 3) earnings of capital and land 2)What conclusion can be reached from the following data? Percentage of income received Gini by coefficient Lowest 40% Highest 20% Country A 24
1)explain in your own words: (Topic- "gains and losses from trade in the specific-factors model )
1) specific-factors model
2) earnings of Labor
3) earnings of capital and land
2)What conclusion can be reached from the following data? Percentage of income received Gini by coefficient Lowest 40% Highest 20% Country A 24.5 37.9 0.35 Country B 21.0 40.7 0.45 Select one: a. The size distribution of income is more equal in Country B. b. Absolute poverty is more widespread in Country B. c. The overall degree of income inequality is lower in Country A d. Both (a) and
3)What do you mean by 'capital widening'? Select one: O a. The process through which the economy increases the amount of capital per worker. O b. An increase in the capital stock that just keeps pace with the expanding labour force. c. An increase in the capital stock at a faster rate compared to the rate of increase in the labour force. O d. Both (b) and (c).
1)
1)
Specific factor model is a variation of Ricardian model and it is firstly introduced by Jacob Viner. This model thus also referred to Ricardo Viner model. The model is use to denote economic changes in accordance with the effects of trade where there is one factor exist specific for an industry. Specific in the name is used to show any factor of production and the one unchanged factor which perform in response to any changes in market is shown by term specific factor. The factors may sometimes developed for concerned production. It makes it difficult to move between industries so they are being immobile.
The basic assumptions in SF model are :
In a perfectly competitive market ,Economy used to produce Any two goods with capital and labor as production factors. Among the factors capital is taken as specific one. Capital is completely unchangeable. Labor is factor which is movable factor between industries costless. In production capital is different for two industries and also unsustainable in process of production.
2) Earnings of labor: Relative prices of manufacture is seemed to be rises. By increase in PM creates rise in relative manufacture price also . It decreases PA. It remains the effect on real wage as constant. While assume PM rises it is found that at higher wage new equilibrium is developed. There will be no unemployment as LM +LA is remains as total labor. even though if any kind of unemployment is found workers can easily fid better jobs in expanding industries. It also makes LA decreases and Increases LM. It makes effect on real wages ,it decreases in relation to manufactured goods.
3) Earnings of capital and land : Effect of trade and benefits in labor earning through trade is high. Rental on land and capital are high. In industries rental reflects in factors earned during the period. The amount can be also rented to any others over the same time. Capital owners benefits from trade as free trade expands, Marginal product of capital shows rise as manufacturing uses more umber of labors. Marginal product of land shows fall as labors used to leaves the agricultural field. Utilization of increased labor quantity raise the specific factor marginal product. In Export factories specific factors gain and falls in importing industries. The capital owners seems to be better off within trade than case of no trade.
2)
The Gini coefficient can be defined as a measure of income inequality of a nation or across a population. The value of Gini Index ranges between zero and one. If Gini coefficient is zero there is equality in the income distribution. If the value is 1(100%), the income inequality is maximum.
The value of gini coefficient is less in country A(0.35) than country B(0.45). So the overall degree of income inequality is lower in country A and the correct option is C.
Option a is incorrect because country B has high index value than A which means greater inequality.
So the correct option is C.
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