International Economics
Chapter 3: The Standard Trade
Model
Dominick Salvatore
John Wiley & Sons, Inc.
Dale R. DeBoer
University of Colorado, Colorado Springs
3-1
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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III
II
I
X
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University of Colorado, Colorado Springs
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III
II
I
3-6
III
II
I
3-7
Relative prices
The equilibrium relative
commodity price in
isolation (or autarky) is
given by the slope of
the tangent.
The slope of this
tangent is Px/PY or the
price of good X divided
by the price of good Y.
This slope also gives
the opportunity cost of
producing X in terms of
foregone units of Y.
Dale R. DeBoer
University of Colorado, Colorado Springs
II
3-8
Nation 1
X
Y
Nation 2
X
Dale R. DeBoer
University of Colorado, Colorado Springs
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Nation 1
X
Y
Nation 2
X
3 - 10
Nation 1
X
Y
Nation 2
X
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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Nation 1
Nation 2
A
B
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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Nation 1
Nation 2
A
C
B
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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Nation 1
Nation 2
A
C
B
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University of Colorado, Colorado Springs
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Nation 1
Nation 2
A
C
B
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University of Colorado, Colorado Springs
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3 - 20
Nation 1
Nation 2
A
C
B
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University of Colorado, Colorado Springs
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3 - 22
Nation 1
Nation 2
A
C
B
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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3 - 25
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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University of Colorado, Colorado Springs
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3 - 30