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Consider a Ricardian framework with two countries, Italy and Czech Republic, and two products, beer and wine. In autarky, the relative price of beer in
Consider a Ricardian framework with two countries, Italy and Czech Republic, and two products, beer and wine.
In autarky, the relative price of beer in Italy is 4/5, while in Czech Republic it is 2/5.
At the trade equilibrium,
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the world relative price of beer can take values from 2/5 to 4/5, depending on the relative size of the countries.
there is no trade between Italy and Czech Republic
Italian workers receive higher real wage in terms of wine
Czech Republic imports beer
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