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Price elasticity of demand and the income elasticity of demand
Define the price elasticity of demand and the income elasticity of demand.
Are the following statements true or false?
Are the following statements true or false? Explain in each case.
a. “Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”
b. “Certain very talented people have a comparative advantage in everything they do.”
c. “If a certain trade is good for one person, it can’t be good for the other one.”
Suppose that all goods can be produced with fewer worker hours in Germany than in France
Suppose that all goods can be produced with fewer worker hours in Germany than in France.
a. In what sense is the cost of all goods lower in Germany than in France?
b. In what sense is the cost of some goods lower in France?
c. If Germany and France traded with each other, would both countries be better off as a result? Explain in the context of your answers to parts (a) and (b).