Find out the trade volume x; for all i, j = 1, 2, 3. The parameter in the gravity model of Anderson and van Wincoop (2003) are V1 = 50, yz = 60, y= = 70,0 = 5, tif = 1+ 0.1 x |i - j| for j j = 1, 2, 3 Use this equation price index Important equations outward multilateral Bipity 1-5 resistance (seller) . XI = P YI market clearance inward multilateral resistance (buyer) = (Bpi)' - E(p) y 1-g P, = [E() world nominal income: y" = Eyi, . n, and P, can be income share: 0, = y,/yw represented by (0;), (t;), or (P,), multilateral resistance Gravity equation . related to all tik Assume ti = ti, a solution 0; = (Bip;) 1 -on!-o to the important equations is n, = P; = (Bip; ) 1 -op1 - P,-o = [ pr-'Bit,-, vi. yiyi/ to 1-0 => Xij yW PP; . Implicit equations for the . y, is exogenously given price indices . unitary income elasticities . di, to are exogenous for k # j, parameters tik 1= Xik I &X;1 1