We analyze how energy price and commodity price affect commodity output in a three-factor, two-good general equilibrium trade model with three factors (capital, labor, and imported energy), respectively. We search for a sufficient condition for a specific pattern of each relationship to hold. We assume factor-intensity ranking is constant. We use the EWS (economy-wide substitution)-ratio vector to analyze. We show that the position of the EWS-ratio vector determines the relationships. Specifically, if the price of good 1 rises, the output of good 2 can rise, if capital and labor are economy-wide complements. This article provides a basis for further applications.
↧