Thursday, June 5, 2014

Large Market Importer

In Prin. of Microeconomics I go through the impact of international trade under the assumption that the nation importing is a "small" market - small relative to overall international trade, not only in terms of geography or population.  Here is an example of a large market importer from the Wall Street Journal.  Notice that Egypt's purchase of wheat has changed the "world" price for wheat, meaning that from Egypt's perspective the supply of wheat is upward sloping.  In the small nation example the "world" price does not change with a change in imports - thus the supply curve has zero slope.

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