Questions on Microeconomics. Please Help?
Consider a country that imports a good from abroad. For each of the following statements, say 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 inelastic, there are no gains from trade."
C. "If demand is inelastic, consumers do not benefit from trade."
- Anonymous10 years agoFavorite Answer
A) true. The gains from trade depend mainly on the change in terms of trade. The goods which the country has no comparative advantage and expensive will be cheaper. If the demand is elastic, the quantity demand will increase more than the reduction in price. The gains of trade will increase.
B) true. Because after trade the price changes will have less effect on quantity demanded.
C) true. The reason is the same as B.Source(s): Anjaree
- 4 years ago
False: If demand is perfectly inelastic, consumers do not benefit from trade.
True: The greater the elasticity of demand, the greater the gains from trade.
False: If demand is perfectly inelastic, there are no gains from trade.
- 7 years ago
I just did this in my microeconomics Practice homework and this was one of my questions so these are the correct answers don't believe me pick true,true, true it'll b WRONG