(A) Define the "Offer Curve" (Or "Reciprocal Demand Curve") of a Country

question 22

Essay

(a) Define the "offer curve" (or "reciprocal demand curve") of a country. If an offer curve is drawn as an upward-sloping curve, what is being assumed about the value of thecountry's elasticity of demand for imports and why does this assumption yield the upward-sloping curve?
(b) Using the usual two-good, two-country offer-curve diagram, identify the equilibrium position and state why the position is one of equilibrium. Then suppose that, from this initial equilibrium position, one country now experiences an increase in productivity in its export industry at the same time that the other country imposes an import tariff. Illustrate and explain the combined or overall impact of these two events on the equilibrium terms of trade and on the quantity traded of each of the two goods. If a combined impact is uncertain, briefly indicate why it is uncertain.

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Definitions:

Defence Mechanism

Psychological strategies used unconsciously by individuals to protect themselves from anxiety and the perception of internal or external threats.

Rationalization

Rationalization is a defense mechanism where individuals justify their actions or beliefs in a logical manner to avoid facing the true underlying motivations or feelings.

Stock Market

A public market for buying and selling company stocks and shares, which are ownership certificates of businesses.

Defence Mechanism

Psychological strategies unconsciously used to protect oneself from anxiety and unacceptable thoughts and feelings.