Simultaneous exports and imports of a single good constitute two-way trade for a nation. The quantitative importance of this type of trade pattern is prima facie evidence of the inadequacy of the orthodox body of theory to provide a realistic framework for analysis of modern patterns of international trade. This chapter will show how two-way trade can take place between a nation and its trading partners and will identify the main characteristics of the trading nations that will give rise to two-way trade.
KeywordsDemand Curve Intermediate Good Factor Price Domestic Currency Supply Elasticity
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