Assume that there are two factors of production: labor and physical capital. When Japan opened to trade in 1860, we saw that Japan started to import rice, a labor-intensive good. What is the impact of Japan's decision to import rice on its factors of production?
1) The demand for labor increased, leading to higher wages for workers
2) The demand for physical capital increased, leading to higher prices for machinery
3) The supply of labor decreased, leading to a decrease in wages
4) The supply of physical capital decreased, leading to a decrease in prices for machinery
