Create an example of an absolute advantage model

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Reference no: EM131247409

Create an example of an absolute advantage model by choosing two countries and a single product.

a. Draw a diagram describing autarky and a pattern of absolute advantage for your example.

b. Show the transition from autarky to trade in your diagram, label the trade flows, and demonstrate the gains from trade.

c. In a new diagram, and starting from a trading equilibrium, show what would happen to the world price if income increased by exactly the same, small amount in both countries.

Reference no: EM131247409

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