1. In some economies relative supply may be unresponsive to changes in prices. For
example, if...

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1. In some economies relative supply may be unresponsive to changes in prices. For
example, if factors of production were completely immobile between sectors, the production
possibility frontier would be right-angled, and output of the two goods would
not depend on their relative prices. Is it still true in this case that a rise in the terms of
trade increases welfare? Analyze graphically.

David · Accepted Answer

1
1. In some economies relative supply may be unresponsive to changes in prices. For example, if factors of production were completely immobile between sectors, the production possibility frontier would be right-angled, and output of the two goods would not depend on their relative prices.

1. In some economies relative supply may be unresponsive to changes in prices. For example, if factors of production were completely immobile between sectors, the production possibility frontier would...

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