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Q. Consider that the relative capital abundance of Australia was so much greater than that of Sri-Lanka, that we would have to locate Australia far to the right on the K/L axis. If this were so far to the right that there was no area of overlap on the w/r axis, then which product would Australia export?
Answer: Australia export food like a result of trade wages will fall in Australia and will rise in Sri-Lanka. Though in this case the wages in Australia will stay higher than in Sri-Lanka create an incentive for migration from the latter to the former country.
Q. Factor-intensity reversals define a situation in which the production of a product can be land-intensive in one country, and relatively labor intensive in another ( at given re
Q . Consider that the relative capital abundance of Australia was so much greater than that of Sri-Lanka, that we would have to locate Australia far to the right on the K/L axis.
What can explain the failure of relative PPP to hold in reality? Answer: Government procedures of the price level differ from country to country. One cause for these differe
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