--%>

Illustrate the rate of exchange of two products

Illustrate the rate of exchange of two products?

E

Expert

Verified

The rate of exchange of these two products will be determined through negotiation; the outcome is called the terms of trade.  The terms of trade will be limited by the relative costs of production within each country.  The U.S. will not forgo more than 1 ton of soybeans to get 3 tons of avocados and Mexico will not give up more than 4 tons of avocados for 1 ton of soybeans.  Somewhere between these limits, trade is possible.  In the text example, the terms of trade are assumed to be 3.5 tons of avocados for each ton of soybeans.  Americans would specialize in soybeans only if they could obtain more than 3 tons of avocados for 1 ton of soybeans by trading with Mexico.

   Related Questions in Business Economics

  • Q : Resource payments correspond to

    Explain the foundation of economics where society’s material wants are Resource payments correspond to resource categories?

  • Q : Case of arbitrage while selling and

    Assume that melons sell for $5 in Brazil when moose pelts sell for $10, still into Canada melons sell for $10 as well as moose pelts sell for $5. A person who buys moose pelts within Canada to sell into Brazil would be doing: (1) speculation. (2) the “invisible

  • Q : Wealth of Nations academic

    By the perspective of nowadays academic standards, Adam Smith must have more evidently acknowledged that several the analyses and insights for that he took credit within his Wealth of Nations had really been gleaned from the writings

  • Q : Price competition My friend can't

    My friend can't succeed to get the answer of this question. Give me solution of this question. From a heterodox perspective, why does destructive price competition drive enterprises to set up market institutions which would abolish price competition?

  • Q : Introduction of the term Control

    Give a brief introduction of the term Control Principle?

  • Q : Speculators decreases price volatility

    Speculators decrease price volatility through, in effect, changing demand curves: (w) out at low prices, and shifting supply curves out at high prices. (x) out at low prices, and shifting supply curves within at low p

  • Q : Restriction of laissez-faire government

    A laissez-faire government is restricted to finding: (1) property rights within a simple fashion and to enforcing private contracts. (2) market prices which guarantee equitable resource allocations. (c) how resources will be allocated efficiently. (4)

  • Q : Elucidate types of unemployment

    Elucidate types of unemployment?

  • Q : Explain about the principle of

    Economic efficiency needs that, relative to the other goods which different individuals might consume, the people who value exact goods relatively the most should own and/or use all goods. Such principle is termed as: (i) economic equity. (ii) allocat

  • Q : Factors of production and the method

    Who owns the factors of production and the method used to coordinate economic activity?