1.Assume that both Paraguay and Poland are unskilled-labour abundant countries. Based on your findings in Question 1, explain in up to 200 words whether your data agree or disagree with the Stolper-Sa

1.Assume that both Paraguay and Poland are unskilled-labour abundant countries. Based on your findings in Question 1, explain in up to 200 words whether your data agree or disagree with the Stolper-Samuelson theorem. (5 marks)

2.Consider the Ricardian model given in Question 3 of Assignment 1.

.                      (a)  Derive the relative demand curve relating the relative demand for Radios to the relative price of Radios. Do this algebraically, and then show what the curve looks like in a diagram (put the relative price of Radios on the vertical axis and the relative quantity of Radios demanded on the horizontal axis).  (2 marks)

.                      (b)  Derive the world relative supply curve of Radios (put the relative price of Radios on the vertical axis and the relative quantity of Radios supplied on the horizontal axis). (2 marks)

.                      (c)  PutinthesamefiguretherelativedemandcurveforRadiosthatyoufoundin part (a) and the world relative supply curve of Radios that you found in part (b). Determine the equilibrium relative price of Radios and the equilibrium relative quantity of Radios under free trade. (2 marks)

.                      (d)  Under free trade, which country produces which good(s)? How many units? (2 marks)

(e)  Who gains from trade? Who loses from trade? State labours’ stance towards free trade in each country. (2 marks)