Macroland produces dishes and glassware. Before trade, a set of dishes sells for $100 and a set of glasses sells for $50. When Macroland opens to trade, foreign demand for domestically produced china is strong, raising the price of a set of dishes to $125. But foreign competition reduces the demand for domestically produced glasses, so they now sell for $25 a set. Assuming workers cannot move between industries, the wages of workers producing dishes will ________ and the wages of workers producing glasses will ________.

Question

Quizplus · Accepted Answer

Workers in the dishes industry see increasing wages because the strong demand for dishes increases the demand for workers. Conversely, the glasses industry sees decreasing wages due to reduced demand for glasses and therefore less demand for workers.

Macroland Produces Dishes and Glassware