Derive the relative demand curve relating the relative demand for fish to the relative price of fish. Solve algebraically, and then draw the curve in a diagram with the relative price of fish on the vertical axis and the relative quantity of fish on the horizontal axis.
Consider the following model of trade between Iceland and Finland. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: fish and wheat. Consumers always spend one fifth of their income on fish and the remainder on wheat. The only factor of production is labor. Each Icelandic worker can produce 1 unit of fish or 1 unit of wheat per unit of time, while each Finnish worker can produce 2 units of fish or 4 units of wheat per unit of time. There are 1 million workers in Iceland and 1.5 million in Finland.