Supply and Demand Analysis of Exports and Imports

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Supply and Demand Analysis of Exports and Imports Advanced Placement Macroeconomics Yorktown High School E.W. Breighton Underhill All Rights Reserved

What are the determinants for the relationship between (X-M) ? World Price The interaction of world supply and demand determines world equilibrium price level. Domestic Price The interaction of domestic supply and demand determine the domestic equilibrium price level.

Equilibrium

What happens in the absence of trade… To domestic prices? To foreign prices? International trade will provide countries the opportunity to import or export goods and services.

Graphing Tips Graph the two countries individual domestic S & D side by side. Use the Eq point as the beginning of the Export and Import Demand Graph. You end at the max Qs and the max Qd as derived from the S & D graph You plot your XM Graph from the Eq on the Y axis

Case Study for Aluminum Reference Textbook Chapter 35 McConnell, p 683-685