Starting from the pretrade equilibrium point in Figure 5.4, assume that tastes in Nation 1 change in favor of the commodity of its comparative disadvantage (i.e., in favor of commodity Y).
(a) What is the effect of this change in tastes on PX / PY in Nation 1? How did you reach such a conclusion?
(b) What is the effect of this change in tastes on r/w in Nation 1?
(c) What is the effect of this on the volume of trade and on the trade partner?
Figure 5.4

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140 120 F 100 140 120 100 L 80 80 Nation 1 60 40 60 Nation 1 I 40 APA 20 PB 20 E 0 20 40 60 80 100 120 0 20 40 60 80 100 120