d. What are the terms of trade? Use PPCs and CPCs to show that each would be better off through specialization and trade. e. Of what principle does this question provide an example?
d. What are the terms of trade? Use PPCs and CPCs to show that each would be better off through specialization and trade.
e. Of what principle does this question provide an example?
d) The terms of trade would be Vermont and Ontario exchanging what they have and don't have. Because Ontario is known for its maple syrup, there is a scarcity of the product in Vermont, so trade would take place. However, the importance of the trade is that it is equal because Vermont specialises in hockey sticks, and Ontario would require that good. As a result, the trade that exists between them is mutual, and one in which both parties can benefit from in order for a nation's relations and economies to prosper. Trading is advantageous since without it, the CPC would be equal to the value of the PPC because customers would be unable to consume more than what is generated.
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