In
economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
and particularly in international trade, an offer curve shows the quantity of one type of product that an agent will export ("offer") for each quantity of another type of product that it imports. The offer curve was first derived by
English economists
Edgeworth and
Marshall
Marshall may refer to:
Places
Australia
*Marshall, Victoria, a suburb of Geelong, Victoria
** Marshall railway station
Canada
* Marshall, Saskatchewan
* The Marshall, a mountain in British Columbia
Liberia
* Marshall, Liberia
Marshall Is ...
to help explain international trade.
The offer curve is derived from the country's
PPF. We describe a Country named K which enjoys both goods Y and X. It is slightly better at producing good X, but wants to consume both goods. It wants to consume at point C or higher (above the PPF). Country K starts in
Autarky
Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems.
Autarky as an ideology or economic approach has been attempted by a range of political ideologies and movement ...
at point C. At point C, country K can produce (and consume) 3 Y for 5 X. As trade begins with another country, and country K begins to
specialize in producing good X. When it produces at point B, it can trade with the other country and consume at point S. We now look at our Offer curve and draw a
ray at the level 5 Y for 7 X. When full specialization occurs, K then produces at point A, trades and then consumes at point T. The price has reduced to 1 Y for 1 X, and the economy is now at equilibrium. The trade is balanced at the equilibrium.
References
Salvatore, Dominick. "International Economics." John Wiley & Sons, Inc, 2001.
International economics
Microeconomics
Economics curves
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