Question

discuss the relation between relative commodity and factor price

Answer 1

In recent years there has been some debate on the consequences for some well-known international trade theorems of the inclusion of heterogeneous capital goods in the process of production.1 In one contribution Steedman and Metcalfe [12] have shown by means of a simple numerical example that the equalisation by trade of so-called ‘factor prices’, the wage and rate of profits, may not occur in these circumstances. Such a result requires a non-monotonic relationship between relative commodity prices and ‘factor prices’. The purpose of this paper is to examine this relationship in the context of a multi-commodity, multi-technique circulating capital model of the type familiarised by Sraffa [11]. We shall attempt to show that circumstances exist in which ‘factor price’ equalisation (f.p.e. for short) may not be realised, and that such circumstances are not dependent on there being complete international specialisation, nor on reversals of ‘factor’ intensity.

Answer 2

The relation between relative commodity and factor price is seen from the movement of free trade between two countries where the prices related to the output goods is equal between the two countries

Explanation:

• In a market which is totally competitive the returns that are calculated for the factor of production is majorly dependent on the value of its marginal productivity.
• This can be explained with assuming that the basic value of the marginal product for the each product of factor of production in the  countries is equal before the the start of the trade under perfectly competitive market condition
• It is seen when the prices of the output goods are equal between the the two countries then their input factors also stand to be equal between the two countries.

To know more about Perfectly competitive market

What are the features of perfectly competitive market ??? ​

https://brainly.in/question/16153678