"The equilibrium relative commodity price at which trade takes place is determined by the conditions of demand and supply for each commodity in both nations.Other things being equal, the nation with the more intense demand for the other nation's exported good will gain less from trade than the nation with the less intense demand." This statement was first proposed by
A) Alfred Marshall with offer curve analysis.
B) John Stuart Mill with the theory of reciprocal demand.
C) Adam Smith with the theory of absolute advantage.
D) David Ricardo with the theory of comparative advantage.

Question

Quizplus · Accepted Answer

The statement refers to the theory of reciprocal demand, which was first proposed by John Stuart Mill. Alfred Marshall's offer curve analysis was a later development in international trade theory. Adam Smith's theory of absolute advantage and David Ricardo's theory of comparative advantage focused on explaining the benefits of specialization and trade rather than the determination of relative commodity prices.

"The Equilibrium Relative Commodity Price at Which Trade Takes Place