In two-country trade equilibrium model it is supposed that there are two countries A and B and they produce two commodities— X and Y. The trade equilibrium of these countries can be analysed under constant, increasing and decreasing cost conditions as below: 1. Trade Equilibrium under Constant Costs: In this case it is supposed that both countries A and B [...]
In this article we will discuss about the multiple equilibria and stability of international trade. The offers curves of two trading countries can determine the position of general equilibrium through the intersection between them. It is possible that the equilibrium occurs not at one unique position but at several positions. Such a situation represents the multiple equilibria. Some of these [...]
J.E. Meade assembled the analytical devices like the production possibility curve, the community indifference curves and offer curves in order to explain the general equilibrium of production, consumption and trade involving the two trading countries. Fig. 4.17 is employed to explain the general equilibrium situation concerning the two trading countries A and B. In Fig. 4.17, the commodity X is [...]