d) In the neoclassical model free trade not only equalises the relative commodity price in the two countries but also equalises the relative wage

The neoclassical model of international trade, often associated with the theories of comparative advantage and free trade, posits that in the absence of barriers such as tariffs or quotas, goods will flow freely between countries based on their relative efficiencies in production. One of the central propositions of this model is that free trade not only equalizes the relative commodity prices in trading countries but also has the potential to equalize relative wages. However, in practice, the realization of this proposition depends on several factors and may not always hold true.

In the neoclassical model, countries specialize in the production of goods in which they have a comparative advantage, meaning they can produce those goods at a lower opportunity cost compared to other countries. This specialization leads to efficiency gains and overall higher levels of output. As goods flow between countries based on comparative advantage, the prices of those goods tend __________ __________ ____ ____ ________ ________ ______ ________.
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