Final answer:
When Canada opens to trade with Mexico, the relative price of corn in Canada falls as it starts importing corn from labor-abundant Mexico, where corn production is more efficient.
Step-by-step explanation:
The student's question about Canada and Mexico, corn and syrup, and the RS-RD diagram pertains to the concepts of comparative advantage and international trade within the field of Economics.
When Canada, which is capital-abundant and therefore has a comparative advantage in the capital-intensive production of syrup, opens to trade with labor-abundant Mexico, which has an advantage in labor-intensive corn production, the equilibrium in the international market changes.
Before trade, Canada's relative price of corn is high due to its comparative disadvantage in corn production. However, upon opening to trade with Mexico, Canada can now import corn at a lower relative price than it costs to produce domestically, due to Mexico’s comparative advantage. Consequently, Canada's relative price of corn decreases, aligning with the international or world relative price, which is determined by the intersection of the global RS (Relative Supply) and RD (Relative Demand) curves.
The RS curve for Canada, which relates the quantity of corn that producers wish to supply to the relative price of corn to syrup, will be steeper compared to Mexico’s, reflecting the higher opportunity cost of producing corn for Canada. When trade is introduced, Canada will tend to export syrup and import corn, resulting in an increase in Canada's consumption possibilities for corn beyond its production possibilities.
The RD curve, which shows the amount of corn that consumers wish to consume relative to syrup at any given relative price, usually slopes downwards, indicating that as the relative price of corn falls, consumers wish to consume more corn relative to syrup.