An economy produces two goods (X and Y) with two factors of production (K and L), where X is labour-intensive and Y is capital-intensive good. If the factor intensities of production of the goods are different at any factor price range and are non–reversible, then under the assumption of constant returns to scale, an increase in the supply of labour at constant commodity prices will lead to
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Theories of international trade has come up 151 times in 6 exams since 2006.
This question is on The Rybczynski theorem, specific factors and immiserising growth, part of Theories of international trade in International Economics.
Other results on how factor growth and factor mobility shape output and welfare.
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Question from the JNU SIS 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.