Reading the notation

Three distinct graph models carry this paper — get their symbols precise, since mixing up which curve moves in which model is the fastest way to lose marks.

📖 Symbols used in international trade

6 terms

Cover the right column and check you can say what each one means.

Pw: World price — the fixed price NZ takes as given in the price-taker model, shown as a horizontal line.
Pt: Trade price — the single world price both countries settle at in the two-country model, between their two separate domestic prices.
X, M: Exports and imports — the gap between quantity supplied and quantity demanded at the world/trade price.
Qd, Qs: Quantity demanded and quantity supplied domestically at the world price — X = Qs − Qd for an exporter, M = Qd − Qs for an importer.
Er: Exchange rate — the price of the NZ dollar in another currency, on the market-for-the-NZ$ graph.
S(NZ$), D(NZ$): Supply and demand for NZ dollars on the foreign exchange market — exports create demand for NZD; imports create supply of NZD.

Practice for this standard covers the whole topic — flashcards and quiz.