Chapter 7

 

Label the X-axis "A's imports of good X and B's exports of good X". Label the Y-axis "A's exports of good X and B's imports of good X".
1.




Graph the following curves by clicking here
a.

Draw Country A's offer curve, and label it OCA.
b.

Draw Country B's offer curve, and label it OCB.
  c. Draw a straight line from the origin to the intersection of the two offer curves. Label this line "(Px/Py)1 or TOT1". The slope of this line represents which country's terms of trade? How is this slope related to the other country's terms of trade?
d.
Suppose country A decides to eliminate all tariffs that it has on their import goods. Demonstrate this change on your graph, and discuss how each country's volume of trade and terms of trade are affected.
View graphing answers to question 1 by clicking
   

 

 





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