Question

Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ______ and wages in the computer industry ______.

Answer 1

Answer:

Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry increases and wages in the computer industry increases.

Explanation:

In the first instance both workers in shoe and computer industries earn the same wages before the reduction in trade barries were introduced. The wages of workers from both industries will definitely increase because their were boost in sales of the products by the locals and foreigners. this positive development will make both companies to earn more revenues. the companies are likely to increase the wages of their worker to boost their morales for increase productivity.

The only difference may be that the Computer workers may earn slight wage increase than the shoe workers because they earn foriegn revenues from the sales of their computer to foreign consumers. However, a higher wage increase of the computer workers are the discretion og th management.