If you are given the pre-trade relative prices of goods, what trading patterns will emerge, if...
If you are given the pre-trade relative prices of goods, what trading patterns will emerge, if any, between countries?
Homework Answers
On the basis of pre-trade relative prices of goods, it can be forecasted that a country having lower price of goods will export to the other nation and import those goods whose prices are higher in domestic market. It will bring a balance for another country as well and international trade between the two countries will take place. Further, the trade pattern will also depend upon the comparative advantage based upon the opportunity cost. A country with relatively lower opportunity cost and better comparative advantage will produce that good and export as well, while another country will produce another goods with lower opportunity cost and comparative advantage.
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If you are given the pre-trade relative prices of goods, what
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