Trade and Technology: The Ricardian Model - Faculty
Trade and Technology: The Ricardian Model - Faculty
Trade and Technology: The Ricardian Model - Faculty
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Autarky: Pattern of production (cont.)<br />
International Commercial Policy<br />
<strong>The</strong> <strong>Ricardian</strong> <strong>Model</strong><br />
This relationship can be captured in a relative supply<br />
curve. Here, the relative supply curve depicts how the<br />
domestic supply of cheese relative to wine varies with<br />
the price of cheese relative to wine.<br />
If P C /P W > a LC /a LW, the economy specializes in cheese<br />
production so that the relative supply of cheese is<br />
infinitely large.<br />
If P C /P W < a LC /a LW, the economy specializes in wine<br />
production so that the relative supply of cheese is zero.<br />
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