| Question | Starting from the pretrade equilibrium point in Figure 5.4, assume that tastes in Nation 1 change in favor of the commodity of its comparative disadvantage (i.e., in favor of commodity Y). (a) What is the effect of this change in tastes on PX / PY in Nation 1? How did you reach such a conclusion? (b) What is the effect of this change in tastes on r/w in Nation 1? (c) What is the effect of this on the volume of trade and on the trade partner? Figure 5.4 |
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| Subject | business economics |
