1. Consider 2 countries that each produce two goods X and Y defined as follows.
X= αLx α=10 X= αLx α=5
Y=βLy β=10 Y=βLy β=10
Suppose that the home country experiences technological growth in the X sector such that α increases to 12. Describe the impact on the free trade price, the pattern of trade and gains from trade.© BrainMass Inc. brainmass.com October 10, 2019, 6:13 am ad1c9bdddf
Theoretically, there would be little change, because the home country already has a comparative advantage in X. Trade ...
Looking at hypothetical countries, we examine the pattern of trade and gains from trade according to Ricardo's theory of comparative advantage.