a) Describe the state of the international market for goods Y and X at an international relative price of P4, i.e., is there an excess supply, excess demand, or equilibrium in the market for goods Y and X? b) Based on your answer in part a, what must happen to the price of X relative to the price of Y? c) Based on b, in which direction must the line labeled P4 in Fig. 4.4 move? d) What is the state of the market at an international relative price of P5?

a) Describe the state of the international market for goods Y and X at an international relative price of P4, i.e., is there an excess supply, excess demand, or equilibrium in the market for goods Y and X? b) Based on your answer in part a, what must happen to the price of X relative to the price of Y? c) Based on b, in which direction must the line labeled P4 in Fig. 4.4 move? d) What is the state of the market at an international relative price of P5?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.8P

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