### Illustrate what is the relative labor supply in the economy

##### Reference no: EM1354036

This problem is based on the HO model. In the Home country that produces cars and food by using capital and labor, the relative demand for labor in the car industry is given by the following equation:
LC/KC = 1/(w/r),
while the relative demand for labor in the food industry is given by the following equation:
LF/KF = 4/(w/r).
The total amounts of labor and capital are 1,000 workers and 200 units of capital, and 120 units of capital are used in the car industry.

(a) Derive the equation for the total relative labor demand in the economy. Draw all the demand curves in the same picture.

(b) Illustrate what is the relative labor supply in the economy? Derive it and draw it in the same picture as in part (a).

(c) Calculate the equilibrium relative price of labor.

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