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n200080 [17]
4 years ago
9

Suppose there are only two factors of production, labor and capital, and two goods, cloth and bicycles. a. The UK has 50M worker

s and 100M units of capital. The ROW has 5B workers and 4B units of capital. Which country is relatively labor abundant?
Business
1 answer:
LiRa [457]4 years ago
7 0

Answer:

ROW

Explanation:

Given that,

UK has 50M workers and 100M units of capital.

ROW has 5B workers and 4B units of capital.

A country is labor abundant if the endowment of labor in that country relative to the other factors is greater than the other countries.

Therefore,

In UK:

= 50 workers ÷ 100M units of capital

= 0.5 workers

For every unit of capital there are 0.5 workers.

In ROW:

= 5B workers ÷ 4B units of capital

= 1.25 workers

For every unit of capital there are 1.25 workers.

Above calculations clearly shows that ROW is relatively labor abundant and UK is relatively capital abundant.

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