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Unformatted text preview: acceptable to country 1. So long as this terms-of-trade is not steeper than the red line, it will also be acceptable to country 2. To see this, go to the right panel. In the right panel Ive reproduced the green terms-of-trade line as well as a blue line which has the same slope as PPF1. This shows that the terms-of-trade line has to be flatter than the red PPF2 but less flat than the blue line. So a terms-of-trade that is acceptable to both has to lie between the slopes of the two countries PPFs. x x y y PPF1 PPF2...
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This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Dezhbakhsh during the Fall '07 term at Emory.
- Fall '07