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Effects of Growth on Relative Prices in a Two-Good N-Country Model

Sérgio Ribeiro da Costa Werlang
Estudios Económicos
Vol. 8, No. 1 (15) (Jan. - Jun., 1993), pp. 57-63
Published by: El Colegio de Mexico
Stable URL: http://www.jstor.org/stable/40311323
Page Count: 7
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Effects of Growth on Relative Prices in a Two-Good N-Country Model
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Abstract

Este trabajo analiza el efecto de un incremento en las dotaciones en un modelo con dos bienes y n países. Se muestra que si la dotación del bien uno se incrementa, entonces su precio relativo al bien 2 también puede incrementarse. Sin embargo, este efecto "perverso" no puede ocurrir si la economía está en un equilibrio de tâtonnement. También se muestra que hay "doble perversidad" en el caso de bienes normales cuando el equilibrio es inestable. /// This paper analyses the effect of an increase of the endowment in a two-good n-country model. It is shown that the endowment of good one can go up and the price of the same good relative to good two can also increase. However, this "perverse" effect cannot occur in both goods if the economy is at a tâtonnement stable equilibrium. This is a new restriction in the form of the equilibrium manifold of an exchange economy. It is also shown that this "double perversity" is the case with normal goods when the equilibrium is unstable.

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