(A) Define the Concept of a Country's (Call It Country

question 13

Essay

(a) Define the concept of a country's (call it country A's) offer curve. Will this curve always be upward-sloping? Briefly, why or why not?
(b) Put country A's offer curve together with the offer curve of a trading partner country (call it country B) and indicate the equilibrium position. Then suppose that, from this equilibrium position, country A's consumers now change their tastes toward wanting relatively more of A's export good at the same time that country B reduces its tariff on A's export good. Explain the impact of each event separately on the volume of trade of each good and on the terms of trade. Then indicate whether it is possible to assess, when the new equilibrium position is attained, the net results of the two shifts together on the volume of trade of each good and on the terms of trade (in comparison with the initial equilibrium). (Assume that the offer curves are "elastic" throughout.)