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Show that improvement in terms of trade bene?ts the economy

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The counterpart to immobile factors on the supply side would be lack of substitution on the demand side. Imagine an economy where consumers always buy goods in rigid proportions-for example, one yard of cloth for every pound of food-regardless of the prices of the two goods. Show that an improvement in the terms of trade bene?ts this economy as well.

Reference no: EM13868624

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