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How do I calculate the workers budget lines in both countries using this example. Consider the following model of trade between Home and Foreign.

How do I calculate the workers budget lines in both countries using this example...


Consider the following model of trade between Home and Foreign. Assume

throughout that those two countries are the only two countries in the world, at

least for purposes of trade. There are two goods: Corn and Radio. Consumers

always spend one-third of their income on Corn and the remainder on Radios. The

only factor of production is labour. Each home country worker can produce 2

units of Corn or 3 units of Radios per unit of time, while each foreign worker can

produce 2 units of Corn or 4 units of Radios per unit of time. There are 30

workers in Home and 60 workers in Foreign.

Top Answer

Budget line is the same as production possibility frontier. We will draw a graph with units of radio on vertical axis and... View the full answer

RADIO UNITS OF Corn.JPG

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