What are the implications of the terms of trade

Reference no: EM133710530

Question: Now consider the following data involving Country A and Country B , producing wheat ( W ) ?and cloth ( C ) . ?Here are the given labour productivities and total labour forces for each country: • ?Country A - ?Labour productivity in wheat AW = 10 ?units of wheat per worker per month; - ?Labour productivity in cloth AC = 5 ?units of cloth per worker per month; - ?Total labour force LA = 100 ?workers. • ?Country B - ?Labour productivity in wheat BW = 8 ?units of wheat per worker per month; - ?Labour productivity in cloth BC = 4 ?units of cloth per worker per month; - ?Total labour force LA = 80 ?workers. What are the implications of the terms of trade between Country A and Country B on their production and consumption levels, and how does this illustrate the benefits of trade for both countries? Assume that the terms of trade are such that Country A trades 2 ?units of cloth for 1 ?unit of wheat with Country B . ?Provide the graph to explain and figure, formal calculations. Explain specific

Reference no: EM133710530

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