Principles of Macroeconomics / Unit 17 MAC 1616 short lesson, about 20 seconds
The Two-Country Trade Model
Captions available
The idea
Put one good and two countries side by side, each with its own demand and supply. Before trade each sits at its own equilibrium, one low and one high. With trade, one price clears both markets.
In practice
The low-price country's price rises and the high-price country's falls.
Where people slip
At that price the exporter's excess supply equals the importer's excess demand.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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