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What is the standard trade model in economics?

The Standard Trade model. I The standard trade model is built on four key relationships: 1. the relationship between the PPF and the world RS curve, 2. the relationship between relative prices and RD, 3. the world equilibrium as determined by world RS and RD, 4. how changes in the terms of trade affect a nation’s welfare.

What is the isovalue line in the standard trade model?

The Standard Trade Model. economy produces where indifference curve representing aggregated consumption preferences is tangent with PPF. At that point, the slope of the PPF defines the relative prices. production and consumption are determined separately. define line of slope equal to the relative prices, called the isovalue line.

What is the relationship between terms of Trade and standard of living?

The relationship between terms of trade and standard of living are not quite as close, though, because as prices rise, quantity sold falls. The important changes are in export earnings, which is the product of price and quantity sold.

What are the effects of the changing pattern of trade?

The changing pattern of trade has differential effects on different Chapters 4 and 5. 1. The productive capacity of an economy can be summarized by its production possibility frontier, and differences in these frontiers give rise to trade. 2.

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