Show that both home and foreign gain from trade
Course:- Econometrics
Reference No.:- EM131135072

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Now suppose world relative demand takes the following form: Demand for apples/demand for bananas = price of bananas/price of apples.

a. Graph the relative demand curve along with the relative supply curve.

b. What is the equilibrium relative price of apples?

c. Describe the pattern of trade.

d. Show that both Home and Foreign gain from trade.

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