Question

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

06 Sep 2023
Answer :
Word Count : 342

The statement provided raises an important aspect of the neoclassical model of international trade. In the neoclassical framework, the theory of comparative advantage suggests that free trade has the potential to equalize not only relative commodity prices but also relative wage rates between two countries.

Here's a breakdown of the statement:

  1. Relative Commodity Prices: According to the theory of comparative advantage, when countries specialize in producing ________ ________ ______ _____ _______ ___.
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