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Ricardian model: Import demand curve Consider Thailand and Germany. Germany imports electronics and exports cars. The...

Ricardian model: Import demand curve

Consider Thailand and Germany. Germany imports electronics and exports cars. The German population is 200 and each worker can produce either one car or one electronic good. German consumers have the following Cobb-Douglas preferences: U = QC1/2QE1/2. Let’s focus on cases where the relative price of electronics is lower than in Autarky in Germany.

a) What is the relative price of electronics in Autarky in Germany?

b) What is total income of consumers in Germany, depending on the price of cars?

c) What is the consumption of electronics in Germany, depending on the relative price PE/PC?

d) What is the German import demand curve for electronics?

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