You are given the following input cost shares in the corn and vehicle industries

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QUESTION:

You are given the following input cost shares in the corn and vehicle industries for the country of Pugelovia:

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Suppose that a change in demand conditions in the rest of the world raises the price of corn relative to vehicles, so producers in Pugelovia try to expand production of corn in order to export more corn.

a. If all factors are immobile between the corn and vehicle sectors, who gains from this change? Who loses?

b. If all factors are freely mobile between the corn and vehicle sectors, who gains from this change? Who loses?


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