1. Suppose that a free-trade equilibrium exists in a two-country, two-good, twofactorworld. Assume..

1. Suppose that a free-trade equilibrium exists in a two-country, two-good, twofactorworld. Assume that the two goods, chemicals (C) and electronic appliances(E), both employ capital (K) and labor (L), and that both factors are perfectlymobile across sectors. Also assume that:• Germany is relatively capital-abundant• China is relatively labor-abundant.• Chemicals are relatively capital-intensive.• Electronic appliances are relatively labor-intensive.• Assume that tastes and technologies are identical in the two countries.(a) On the graph below, sketch the relationship between relative product price, relativefactor price and relative factor use in each industry in Germany and China. (Under theassumption of identical technologies, the same curves can be used to describe therelationships in both Germany and China.)