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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Consider a country that imports a good from abroad. For each of following statements, state whether it is true or false. Explain your answer.

a. "The greater the elasticity of demand, the greater the gains from trade."

  b. "If demand is perfectly inelastic, there are no gains from trade."

c. "If demand is perfectly inelastic, consumers do not benefit from trade."

Sub part (a):

To determine
Importing and the effects of importing to the country.

Explanation

When the world price of the commodity is below the domestic price and the country imports the commodity from the world market, this will reduce the domestic price to the world price. As a result of the fall in the price level in the economy, the domestic demand will increase and the domestic supply will fall...

Sub part (b):

To determine
Importing and the effects of importing to the country.

Sub part (c):

To determine
Importing and the effects of importing to the country.

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