The Board of Schmeckt Gut (energy bar product) wants to convince the Government of Industria that a Free Trade Agreement with Atollia would be beneficial for Industria’s economy.
1- If we assume that a free trade agreement with Atollia would indeed increase the demand for our energy bars, what effect would this have for Schmeckt Gut’s labour demand? What about the development of wages? Explain!
2- Assuming that the development of Schmeckt Gut’s labour demand is a good indicator for Industria on the whole, what would be the impact on Industria’s economy? Explain using an appropriate model.