Given:
Assume that you are working in an automobile factory in your country that uses workers (labour) like yourself and capital to produce cars, and that this capital cannot be moved to cheese production that requires land and labour, but no capital. Only two goods, cars and cheese can be produced with these resources.
Required:
If relative prices of cheese were to increase in your country, what would be the impact on workers such as yourself and capital owners in your country, and why? Illustrate your answer by an appropriate diagram, applying your knowledge of the Specific-Factors model. Remember to state all assumptions behind this model