The concept of reciprocal demand suggests that:
A) the country with the greater demand for the other country's product will gain more from trade.
B) the country with the greater demand for the other country's product will gain less from trade.
C) that the demand for another country's product does not influence the terms of trade.
D) that the terms of trade will dictate the amount of debt the country will acquire to purchase the product.
E) Demand is more important than supply.

Question

Quizplus · Accepted Answer

The concept of reciprocal demand, as part of international trade theory, suggests that the country with the greater demand for the other country's product will actually gain less from trade. This is because the terms of trade tend to be more favorable to the country whose demand is less elastic, as it can command more for its exports in exchange for imports.

The Concept of Reciprocal Demand Suggests That