If labour is abundant in South Africa but capital is scarce,when South Africa opens to trade,the price of labour will _____ and the price of capital will _____.

Question

Quizplus · Accepted Answer

When South Africa opens to trade, the increased competition will likely result in an increase in demand for labor, causing the price of labor to rise. However, with capital being scarce, foreign investments are likely to flow into the country, which will increase the supply of capital and thereby reduce its price. Hence, the price of capital will fall.

If Labour Is Abundant in South Africa but Capital Is