Given the Following Table Showing Possible Terms of Trade for Country

question 18

Short Answer

Given the following table showing possible terms of trade for country I and country I's corresponding demand for imports of good Y at each terms of trade:
$\begin{array}{cl}&&&\begin{array}{c}\text { possible terms } \\\text { of trade }\end{array} & \begin{array}{c}\text { I's quantity demanded } \\\text { of imports of Y }\end{array} \\\hline\end{array}$

A) $\quad$$\quad$$1 X: 1 Y \text { or } P_{X} / P_{Y}=1 \quad \quad \quad 20 \text { units }$

B) $\quad$$\quad$$1 \mathrm{X}: 2 \mathrm{Y} \text { or } \mathrm{P}_{\mathrm{X}} / \mathrm{P}_{\mathrm{Y}}=2 \quad \quad \quad 46 \text { units }$

C) $\quad$$\quad$ $1 X: 3 Y \text { or } P_{X} / P_{Y}=3 \quad\quad\quad 69 \text { units }$

D) $\quad$$\quad$$1 X: 4 Y \text { or } P_{X} / P_{Y}=4 \quad\quad\quad 84 \text { units }$
Calculate the supply of exports of good X by country I at each terms of trade and plot the resulting offer curve. What is the nature of the elasticity of demand for imports between [i] points (a) and (b); [ii] points (b) and (c); and [iii] points (c) and (d)? How do you know? What might account for these respective elasticities?

• A) \(\quad \)\(\quad \)\(1 X: 1 Y \text { or } P_{X} / P_{Y}=1 \quad \quad \quad 20 \text { units }\)
• B) \(\quad \)\(\quad \)\(1 \mathrm{X}: 2 \mathrm{Y} \text { or } \mathrm{P}_{\mathrm{X}} / \mathrm{P}_{\mathrm{Y}}=2 \quad \quad \quad 46 \text { units }\)
• C)\(\quad \)\(\quad \) \(1 X: 3 Y \text { or } P_{X} / P_{Y}=3 \quad\quad\quad 69 \text { units }\)
• D)\(\quad \)\(\quad \)\(1 X: 4 Y \text { or } P_{X} / P_{Y}=4 \quad\quad\quad 84 \text { units }\)
• Calculate the supply of exports of good X by country I at each terms of trade and plot the resulting offer curve. What is the nature of the elasticity of demand for imports between [i] points (a) and (b); [ii] points (b) and (c); and [iii] points (c) and (d)? How do you know? What might account for these respective elasticities?

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