Trade Leads to a Convergence of Relative Prices Without trade: Home equilibrium relative price is equilibrium relative price is _______ • Trade leads to convergence of relative prices. & Foreign Like the Ricardian model, the Heckscher-Ohlin model predicts a convergence of relative prices with trade. Relative price of cloth PP (PJPA) (POP) (POP) . With trade, the relative price of cloth rises in the relatively labor abundant (home) country and falls in the relatively labor scarce (foreign) country. RD Home RS Relative quantity of cloth, QO,

Trade Leads to a Convergence of Relative Prices Without trade: Home equilibrium relative price is equilibrium relative price is _______ • Trade leads to convergence of relative prices. & Foreign Like the Ricardian model, the Heckscher-Ohlin model predicts a convergence of relative prices with trade. Relative price of cloth PP (PJPA) (POP) (POP) . With trade, the relative price of cloth rises in the relatively labor abundant (home) country and falls in the relatively labor scarce (foreign) country. RD Home RS Relative quantity of cloth, QO,

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter4: Prices: Free, Controlled, And Relative

Section: Chapter Questions

Problem 5WNG

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