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Lecture_7_post - • Determine production and consumption...

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9/19/2008 1 Lecture 7 Economics 3610 Cornell University Fall 2008 International Trade Equilibrium Two countries are in a trade equilibrium when: the relative price of each good is the same in the two countries the amount of each good that the countries want to trade is equal Characterizing the equilibrium Determine the relative price of wheat or cloth in the trade equilibrium
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Unformatted text preview: • Determine production and consumption in both Home and Foreign What is Equilibrium Trade Price? • Graphical solution – Plot Home Export Supply Curve – Plot Foreign Import Demand Curve Intersection at Equilibrium Price – Intersection at Equilibrium Prices • Algebraic solution – Solve for Home, Foreign’s demand...
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