ECON 4290 Study Guide - Midterm Guide: Contract Curve, Comparative Advantage, Edgeworth Box
15 Jan 2019
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Document Summary
Chapter 4 combines the demand and production models studied thus far to derive some of the most fundamental results in economics. The ultimate objective of economic analysis in general is to assess how individuals fare as the economic environment changes. In trade, an important variable affecting the consumer"s wellbeing is the international country"s terms of trade. The terms of trade are affected by changes in worldwide demand for and supply of tradable goods. Changing conditions in foreign countries may shift the terms of trade, or, if the home country is large, the terms of trade may be altered by changing conditions at home. By contrast, a small country is defined as a country unable to affect the equilibrium prices in world markets. the importance of the terms of trade, and therefore the. Two issues that highlight importance of world demand and supply elasticities, are the transfer problem and the possibility of immiserizing growth.
