The terms of trade refer to the ratio at which a country can exchange its exports for imports.
Offer curves are used to determine the equilibrium price at which trade takes place in international economics.
The equilibrium-relative commodity price at which trade will take place can be determined using both partial and general equilibrium analysis.
Partial equilibrium analysis considers the impact of a policy on a single market, holding all other markets constant.
In Figure 4-1, at a relative price greater than P1, Nation 1's excess supply of X gives rise to Nation 1's international supply curve of X.
Test your knowledge of international economics with a focus on demand and supply, offer curves, and terms of trade. Explore how equilibrium prices at which trade takes place are determined and how the terms of trade have changed over time.
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