Re: JNU International doubts......

Posted by Arushi :)) on Mar 24, 2014; 3:59am
URL: http://discussion-forum.276.s1.nabble.com/JNU-International-doubts-tp7585402p7585405.html

i agree with you on question 3.
for question no. 1;
If there is no trade
then country A ( within the country)
will trade 1.4 units of cloth for 1 unit of food .
and 0.71 units of food for 1 unit of cloth.
Similarly, country B
will trade 0.66 units of cloth for 1 unit of food
and 1.5 units of food for 1 unit of cloth.
If they agree to terms of trade ratio of 1:1,
If country A produces cloth only, then in exchange of 1 unit of cloth it will get 1 unit of food, ear;ier it had to give 1.4 units of cloth for a unit of food.
Similarly, if country B produces food only, it would be beneficial as in exchange of a unit of food, it can get 1 unit of cloth, earlier it had to trade 1.5 units of cloth for a unit of food.
So according to me ,
 (b) A will specialize in cloth, and export cloth and import food from B- this is right...