Econ - International Trade I am trying to figure out #4-#7. I am just not sure h

Question

Econ - International Trade

I am trying to figure out #4-#7.

I am just not sure how they all relate to one another. I have a few guesses to create the graph in #4 which I think are correct, but I would like to compare them to someone else's since I am still trying to grasp this important concept for this class.

I am using International Trade by McLaren at the moment, this is from Chapter 2. If anyone can explain their answer that would be more helpful then just giving numbers, I need to understand the concept more than anything!

Thank you so much!

Consider the following model of trade between Iceland and Finland. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: fish and wheat Consumers always spend one fifth of their income on fish and the remainder on wheat. The only factor of production is labor. Each Icelandic worker can produce 1 unit of fish or 1 unit of wheat per unit of time, while each Finnish worker can produce 2 units of fish or 4 units of wheat per unit of time. There are 1 million workers in Iceland and 1.5 million in Finland. Which country has an absolute advantage in fish? In wheat? Which country has a comparative advantage in fish? In wheat? Find the autarky relative price of fish in both countries (i.e., the price of fish divided by the price of wheat), and draw the typical worker's budget line in both countries. Derive the relative demand curve relating the relative demand for fish to the relative price of fish. Solve algebraically, and then draw the curve in a diagram with the relative price of fish on the vertical axis and the relative quantity of fish on the horizontal axis. Derive the world relative supply curve and draw it on the diagram that you created in Problem S. Compute the equilibrium relative price of fish under free trade, and draw the budget lines for a typical worker in each country. Which country produces which good or goods? Is there complete specialization? Who gains from trade?

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Econ - International Trade I am trying to figure out #4-#7. I am just not sure h

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