The images are to be referred to for the questions. Thank you.Question:1. Describe the new price line.2. Is this change in the international relative price an improvement or deterioration in the terms of trade of the rest of the world? Explain. Consider the rest of the world with free trade (production at Si and consumption at C1), as shown in the graph above.wWThe international relative price of cloth now changes to 1.3 (from 1).Relative Price of Cloth = x unit of wheat per cloth WheatRest ofthe World553015Price =0.67 WIC6080100Cloth1 WIC

Free trade is always beneficial for an economy as it increases the overall welfare of the nation by…

Answered: Question: 1. Describe the new price…

Question: 1. Describe the new price line. 2. Is this change in the international relative price an improvement or deterioration in the terms of trade of the rest of the world? Explain.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Concept explainers

Protective Tariffs

A tariff is a kind of tax that is charged on exported and imported items. It means tariff is charged on both kinds of goods i.e., exported and imported. However, some goods may be exempted from this kind of tariff. Protective Tariffs refer to the charges which a country charged on imported goods to protect its domestic market. It also protects countries Industrialists in their Production. So, that their markets remain intact and do not get dumped by outside supply.

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The images are to be referred to for the questions. Thank you.

Question:

1. Describe the new price line.

2. Is this change in the international relative price an improvement or deterioration in the terms of trade of the rest of the world? Explain.

Consider the rest of the world with free trade (production at Si and consumption at C1), as shown in the graph above.
w
W
The international relative price of cloth now changes to 1.3 (from 1).
Relative Price of Cloth = x unit of wheat per cloth

Wheat
Rest of
the World
55
30
15
Price =
0.67 WIC
60
80
100
Cloth
1 WIC

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